The Origins of Limited Liability in Great Britain, the First 'Panic', and Their Implications for Limited Liability and Corporate Governance Today
25 Pages Posted: 15 Jan 2004
Date Written: 31/12/2003
Underpinning the Industrial Revolution in Great Britain was the ability by which businesses could raise funds because of the benefits of limited company status. When it became freely available, limited liability gained immensely popular. However, the crash of, and revelations of fraud at, the well-known City of London company, Overend Gurney, changed investor views to distrust and scepticism. It is shown how scepticism was gradually eroded and how limited liability eventually regained popularity. It is also shown how this illustrates the bursting of a speculative bubble and the financial instability hypothesis with similarities to the case of instability at the end of the 20th century in the UK.
Keywords: Fraud, Crash, Limited Liability, Financial Panic
JEL Classification: M40, M41, N83
Suggested Citation: Suggested Citation