SOSC 2330 Study Guide - Midterm Guide: Initial Public Offering, Nyse American, Import Substitution Industrialization
30 May 2015
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Sosc 2330 political economy of law, policy and organization. The owners of historic corporations were liable for the corporation"s debt. To illustrate, if the hudson"s bay company had gone bankrupt in the 18th century, then its creditors could obtain repayment by seizing the wealth of its stockholders. Given unlimited liable of investors in a company for its debts, people who invest must carefully monitor and control the company"s policies. In contrast, the owners of modern corporations are not liable for the corporation"s debts. To illustrate, if an airline goes bankrupt its creditors can liquidate its assets, but its creditors cannot seize the homes, cars, or bank accounts of its stockholders. As a result of limited liability, people who invest in stock run the risk of losing their investment and nothing more. Limited liability allows people to invest in a company without monitoring or controlling the company"s policies so thoroughly the amount invested.
