The impact of limited liability on ownership and control: Irish banking, 1877-1914

Limited liability is regarded as the sine qua non of the modern company, enabling firms to raise capital from a broad spectrum of investors who have well-diversified portfolios. This article uses the ownership records of an Irish bank, which converted to limited liability in 1883, to explore the impact of introducing limited liability upon ownership and control. We find that ownership becomes more dispersed amongst individuals from a broader social and geographical spectrum. However, there appears to be little impact on portfolio diversification. Furthermore, although limited liability appears to contribute to the rise of the professional director, the evidence suggests that managerial incentives may have been weakened.