The principle of limited liability was implied: shareholders stood to lose only their investment in the company and no other assets in the event that it failed.15
The concept of limited liability fundamentally changes the risk profile for investors. It assures shareholders that their personal assets are protected, and they will only lose what they invested in a company if it fails. This principle encourages investment, as individuals can participate in business ventures without the fear of losing their personal wealth.
Niall Ferguson, in his book "The Ascent of Money," highlights the significance of limited liability in the development of modern finance. By allowing individuals to limit their financial risk, it fosters entrepreneurship and leads to greater economic growth, as more people are willing to invest in business enterprises with reduced personal stakes.
