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American Law and Economics Review 2005 7(2):439-483; doi:10.1093/aler/ahi013
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© The Author 2005. Published by Oxford University Press on behalf of the American Law and Economics Association. All rights reserved. For permissions, please e-mail: journals.permissions@oupjournals.org

Limited Liability in California 1928–31: It’s the Lawyers

Mark I. Weinstein

Marshall School of Business
Gould School of Law, University of Southern California

Send correspondence to: Mark Weinstein, Marshall School of Business, University of Southern California, Los Angeles, CA 90089-1427; e-mail: mark.weinstein{at}marshall.usc.edu.

Only in 1931 was the California Corporate Code revised to provide for limited liability. In earlier work I found that this move had no detectable effect on shareholder wealth. In this article I examine the potential beneficiaries of this change with an eye toward finding out who wanted this change. Using this historical example we can shed light on a number of issues including: (1) the economic impact of limited liability; (2) the role of lawyers, especially lawyers of high prestige, in determining the law; and (3) the competition or lack thereof among states in designing their corporate codes.


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