Year: 2021
Type: article
Abstract: ABSTRACT We study whether banks are riskier if managers have less liability. We focus on New England between 1867 and 1880 and consider the introduction of marital property laws that limited liability for newly wedded bankers. We find that banks with managers who married after a law had higher leverage, delayed loss recognition, made more risky and fraudulent loans, and lost more capital and deposits in the Long Depression of 1873 to 1878. These effects were most pronounced for bankers with the largest reduction in liability. We find no evidence that limiting liability increased firm investment at the county level.
Source: The Journal of Finance
DOI: 10.1111/jofi.13011
Authors: PETER KOUDIJS, LAURA SALISBURY, GURPAL SRAN
Institution: Erasmus University Rotterdam
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,500
OpenAlex ID: W3130445650