Don't Leave Home Without it: Limited Liability and American Express

USC Law Legal Studies Research Paper No. 05-02

1st Annual Conference on Empirical Legal Studies Paper

44 Pages Posted: 11 Feb 2005

See all articles by Mark Weinstein

Mark Weinstein

University of Southern California - Marshall School of Business - Finance and Business Economics Department; University of Southern California - Gould School of Law

Date Written: 6/28/2006

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.

Keywords: limited liability, event studies

JEL Classification: K22, G33

Suggested Citation

Weinstein, Mark Ira, Don't Leave Home Without it: Limited Liability and American Express (6/28/2006). USC Law Legal Studies Research Paper No. 05-02; 1st Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=665741 or http://dx.doi.org/10.2139/ssrn.665741

Mark Ira Weinstein (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States
213-740-6499 (Phone)
213-740-6650 (Fax)

University of Southern California - Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States

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