Peter Koudijs obtains NWO Vidi grant

Patrick Groenen, Dean of Erasmus School of Economics, is delighted with the performance of Peter Koudijs: ’Peter is a creative researcher with a strong publication record in the top economics journals. The awarding of this Vidi is a clear recognition of his talent. I am looking forward to the outcomes of this project.’

Adhemare de Rijk, Funding Manager Research, reacts: ‘Peter has been meticulous during the writing and preparation of application process. His research is innovative and relevant, and this project will show interesting insights in limited liability.’

Short summary of Peter Koudijs’ NWO Vidi research project

Limited liability, the ability to walk away from certain debts, is seen as one of the hallmarks of modern economics. In 2016, The Economist argued it is “one of man’s greatest inventions” that “encourages investment by limiting people’s downside risk.” Nevertheless, it has shortcomings. In the extreme, if people never have to own up to their debts, no-one would ever be willing to lend to them. In other words, there appears to be a trade-off. This research project investigates the effect of limited liability on entrepreneurial activity. Does it increase because entrepreneurs are willing to take more risk, or does it decrease because lenders become unwilling to lend? The research uses the 19th century U.S. as a laboratory. Between 1800 and 1900 rules on limited liability changed dramatically. In this period, limited liability was a state, rather than a federal, matter and states introduced different pieces of legislation at different points in time. The project examines the effects on innovation, investment, human capital accumulation and entrepreneurs’ location choice. Taken together, this will provide a broad perspective on how limited liability affects the economic decision making of entrepreneurs, and how far society might ideally want to limit liability to optimally trade off risk sharing versus agency costs.

Peter Koudijs specialises in the history of financial markets. He studies relevant historical cases which yield important lessons for the world of today, using unique natural experiments. Peter Koudijs was Associate Professor of Finance at the Stanford Graduate School of Business where he taught History of Financial Crises in the MBA programme. He joined Stanford Graduate School of Business in August 2011. Koudijs has obtained various grants and fellowships from the Economic History Association and different Dutch and Spanish scholarship programmes.