This paper analyzes the impact of exceptions to the shareholders' limited liability principle, which exists only in Korea, on corporate activities. The paper constructs a model of a firm to examine the effect of the exceptions to the limited liability principle on corporate investment activities. It shows that the violation of limited liability increases the firm's expected corporate bankruptcy costs, thereby reducing investment. In the empirical analysis, the paper examines whether firms with the largest shareholder's stake exceeding 50%, which is the condition that the limited liability is exempted, decrease investment. The results show that corporate investment is very concentrated in observations that the largest shareholder's stake did not exceed 50%. The investment decreases sharply in the cases of the largest shareholder's stake exceeding 50%. The results of this study provide implications on how exceptions to the limited liability principle in Korea affect corporate investment activities.

Preface
Executive Summary

Chapter 1 Introduction

Chapter 2 Exceptions to the Limited Liability Principle: The Secondary Tax Liability System for Investors
　Section 1 The Secondary Tax Liability System for Investors
　Section 2 Evolution of the Secondary Tax Liability System
　Section 3 Exceptions to the Secondary Tax Liability System
　Section 4 International Cases

Chapter 3 Model Analysis
　Section 1 The Model
　Section 2 Conclusion

Chapter 4 Empirical Analysis
　Section 1 Data and Analytical Methods
　Section 2 Analysis Results
　Section 3 Conclusion

Chapter 5 Conclusion and Policy Implications

References
ABSTRACT