Based on a wide array of data collected by the author, this book uses clear theoretically motivated economic analysis to explain the structure, performance, and influence of universal banks and securities markets on firms during industrialisation. The German universal banks played a significant but not overwhelming role in the ownership and control of corporate firms. Banks gained access to boards via a confluence of their underwriting and brokerage activities, the legal phenomena of bearer shares and deposited voting rights, and the flourishing securities markets of the turn of the twentieth century. In general, bank relationships had little impact on firm performance; stock market listings, or ownership structure, were more important. The findings show that securities markets can thrive within a civil-law, universal-bank system and suggest that financial system complexity can favour rapid industrial expansion.
This book examines the origins of modern corporate finance systems during the rapid industrialization period leading up to World War I; leading to three sets of conclusions. First, modern financial systems are rooted in the past, are idiosyncratic to specific countries and are highly path-dependent. Therefore, to understand current financial institutions, we must take stock of the forces at play in the near and distant past. Second, financial institutions and markets do not create economic growth without significant first steps in industrial development and supporting institutions. Third, and most important from the modern policy standpoint, there is no 'one-size-fits-all' solution to financial system design and industrial development. Having specific types of financial institutions is far less important than developing a strong, stable and legally protected financial system with a rich diversity of institutions and vibrant markets that can adapt to changing needs.
This book examines the origins of modern corporate finance systems during the rapid industrialization period leading up to World War I; leading to three sets of conclusions. First, modern financial systems are rooted in the past, are idiosyncratic to specific countries and are highly path-dependent. Therefore, to understand current financial institutions, we must take stock of the forces at play in the near and distant past. Second, financial institutions and markets do not create economic growth without significant first steps in industrial development and supporting institutions. Third, and most important from the modern policy standpoint, there is no 'one-size-fits-all' solution to financial system design and industrial development. Having specific types of financial institutions is far less important than developing a strong, stable and legally protected financial system with a rich diversity of institutions and vibrant markets that can adapt to changing needs.
Based on a wide array of data collected by the author, this book uses clear theoretically motivated economic analysis to explain the structure, performance, and influence of universal banks and securities markets on firms during industrialisation. The German universal banks played a significant but not overwhelming role in the ownership and control of corporate firms. Banks gained access to boards via a confluence of their underwriting and brokerage activities, the legal phenomena of bearer shares and deposited voting rights, and the flourishing securities markets of the turn of the twentieth century. In general, bank relationships had little impact on firm performance; stock market listings, or ownership structure, were more important. The findings show that securities markets can thrive within a civil-law, universal-bank system and suggest that financial system complexity can favour rapid industrial expansion.
