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Abstract:
The appraisal remedy affords a shareholder the option redeem her shares for cash in the event of certain corporate actions, such as mergers. While appraisal appears to have been developed to protect shareholders who might oppose a corporate action yet be unable to sell their shares for fair value in a liquid market, the value of appraisal to shareholders of publicly traded firms is questionable. This is especially true when we realize that shareholder class actions for breach of fiduciary duty provide an alternative avenue of recovery and are easier to initiate. In this paper we present the first large-scale empirical study of the effect of access to appraisal on target shareholder gains from acquisitions. We examine 1,350 mergers involving publicly held firms. In some of these mergers dissenting shareholders could seek an appraisal and in others appraisal was not available. We find some evidence that appraisal offers dissenting shareholders hold-up power that reduces average shareholder gains in certain transactions. However, for the entire sample, we find no evidence that appraisal has any effect, positive or negative, on target shareholder gains from takeovers.

Abstract:
Limited liability is generally viewed as the hallmark of the modern business enterprise. Commentators generally feel that limited liability played a major role in economic growth for the last century and a half. Recently, however, economic analyses of limited liability have focused on some potential costs associated with this regime, though most still view limited liability as optimal. Whether or not the advantages of limited liability outweigh the costs is, ultimately, an empirical question. In this paper I provide the first empirical evidence on the effect of adopting limited liability in a jurisdiction that waited until well into the 20 th century do so. I examine the effect of the change in law on incorporation rates and shareholder wealth. I also examine the political economy of change, with an eye toward the motives for the change. Overall, I find no evidence that adopting limited liability when California did, in 1931, had any significant affect on corporations or shareholders. Consistent with economic theory, the change was opposed by groups that extended trade credit. It appears that the main group that wanted to move to limited liability was the organized corporate bar in California.

Abstract:
What is the value of limited liability to the corporation? Financial economists take the value of limited liability for granted and there has been little empirical study of its value. Few natural experiments allow us to estimate the value of limited liability. One of these, however, is the case of American Express Company. It appears that American Express was the last publicly traded unlimited liability firm in the United States, becoming a corporation with limited liability only in 1965. In this paper, I examine the effects of adopting limited liability on the value of American Express shares, and on their risk. Consistent with economic theory and previous empirical research [Weinstein (2003)], I find little effect on firm value, and a reduction in both systematic and unsystematic risk. This paper also contributes to the empirical methodology of event studies.

limited liability, event studies

Abstract:
We examine the change in share prices of firms incorporated in California at the time that California moved from pro-rata unlimited liability to limited liability, 1928 ? 1931. We find no evidence that the change had any detectible affect on share prices. However, due to small sample size our tests may be weak. Moreover, peculiarities of the California law, and the time the change was made, make it difficult to generalize from this one episode to the contemporary world.

Abstract:

Abstract:
The pricing of the Chen, Roll, and Ross (CRR) macrovariables is re-examined and found to be surprisingly sensitive to reasonable alternative procedures for generating size portfolio returns and estimating their betas. These methods include the full-period post-ranking return approach used in many recent studies. Strong evidence of pricing is obtained only for their industrial production growth factor and, in another contrast, for the VW market index. In particular, the corporate-government bond return spread, an important factor in CRR, is insignificantly negative for the 1958-1983 period, corroborating the cross-sectional regression results.