For Richer, for Poorer: Bankers' Liability and Bank Risk in New England, 1867 to 1880

Peter Koudijs*, Laura Salisbury, Gurpal Sran

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Scopus)
2 Downloads (Pure)

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.

Original languageEnglish
Pages (from-to)1541-1599
Number of pages59
JournalJournal of Finance
Volume76
Issue number3
DOIs
Publication statusPublished - Jun 2021

Bibliographical note

Publisher Copyright:
© 2021 The Authors. The Journal of Finance published by Wiley Periodicals LLC on behalf of American Finance Association

Fingerprint

Dive into the research topics of 'For Richer, for Poorer: Bankers' Liability and Bank Risk in New England, 1867 to 1880'. Together they form a unique fingerprint.

Cite this