Limited Liability in California 1928-31: It's the Lawyers

Only in 1931 was the California Corporate Code revised to providefor limited liability. In earlier work I found that this movehad no detectable effect on shareholder wealth. In this articleI examine the potential beneficiaries of this change with aneye toward finding out who wanted this change. Using this historicalexample 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 designingtheir corporate codes.