Investment Banks as Corporate Monitors in the Early 20th Century United States

  title={Investment Banks as Corporate Monitors in the Early 20th Century United States},
  author={Carola Frydman and Eric Hilt},
  journal={Political Economy - Development: Political Institutions eJournal},
  • C. Frydman, Eric Hilt
  • Published 2014
  • Political Economy - Development: Political Institutions eJournal
We use the Clayton Antitrust Act of 1914 to study the effect of bankers on corporate boards in facilitating access to external finance. In the early twentieth century, securities underwriters commonly held directorships with American corporations; this was especially true for railroads, which were the largest enterprises of the era. Section 10 of the Clayton Act prohibited investment bankers from serving on the boards of railroads for which they underwrote securities. Following the… Expand
Shareholder Rights and Share Capital: The Effect of the 1901 Russian Corporation Reform, 1890–1905
During the nineteenth and early twentieth centuries, western European countries introduced general incorporation and additional flexible enterprise forms, but the Russian Empire left its concessionExpand
Challenges for Banking Services in the Knowledge Economy
Abstract In this paper, we have covered many of the roles that banks play in the financial system. Banks act as delegated monitors that ensure that economic agents allocate their resourcesExpand
The Value of Banks’ Political and Business Connections in the Russian Industrialization of the 1890s and the Crisis of 1899–1902
Do personal connections matter for the performance of commercial banks in the period of economic development and financial stress? In the 1890s, the Russian Empire, when undergoing rapid state ledExpand
Market and Regional Segmentation and Risk Premia in the First Era of Financial Globalization
We study market segmentation effects using data on U.S. railroads that list their bonds in New York and London between 1873 and 1913. This sample provides a unique setting for such analysis becauseExpand
The Volcker Rule and Market-Making in Times of Stress
Focusing on downgrades as stress events that drive the selling of corporate bonds, we document that the illiquidity of stressed bonds has increased after the Volcker Rule. Dealers regulated by theExpand
Financial Market History: Reflections on the Past for Investors Today
Since the 2008 financial crisis, a resurgence of interest in economic and financial history has occurred among investment professionals. This book discusses some of the lessons drawn from the pastExpand
Financial Inclusion, Human Capital, and Wealth Accumulation: Evidence from the Freedman’s Savings Bank
This paper studies how access to financial services among a previously unbanked group affects human capital, labor market, and wealth outcomes. We use novel data from the Freedman’s SavingsExpand


Capital raising, underwriting and the certification hypothesis
Examines the role of the underwriter in the process of raising capital though equity issuance. It is assumed that there is asymmetric information between the insider shareholders and the outsideExpand
Organization Structure and Credibility: Evidence from Commercial Bank Securities Activities Before the Glass-Steagall Act
This paper investigates how organizational structure can affect a firm's ability to compete. In particular, we examine the two ways in which U.S. commercial banks organized their investment bankingExpand
Why Has There Been So Little Block Holding in America
At the start of the twentieth century, corporate control in the United States looked relatively “normal.” There were no visible large differences between corporate control in the U.S. and corporateExpand
Understanding America's Hesitant Steps Toward Financial Capitalism: Politics, the Depression, and the Separation of Commercial and Investment Banking
Few would disagree that the Glass-Steagall Act of 1933 is thecontinental divide in American financial and banking history. Bydisallowing banks from getting involved in the investment bankingindustry,Expand
Universal Banking and the Performance of German Firms
Universal banking is an alternative mechanism to a stock market for risk-sharing, for providing information for guiding investment, and for contesting corporate governance. In Germany, where theExpand
Financial Expertise of Directors
The composition and functioning of corporate boards is at the core of the academic and policy debate on optimal corporate governance. But does board composition matter for corporate decisions? InExpand
The Value of Investment Banking Relationships: Evidence from the Collapse of Lehman Brothers
We examine the long-standing question of whether firms derive value from investment bank relationships by studying how the Lehman collapse affected industrial firms that received underwriting,Expand
The pre-WWI period saw the heyday of “financial capitalism”—the dominance of investment bankers in their dealings with firm managers—in the United States. This form of organization had costs: itExpand
Bondholders versus bond-sellers? Investment banks and conditionality lending in the London market for foreign government debt, 1815-1913
This paper offers a theory of conditionality lending in nineteenth-century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able andExpand
Bankers on the board and the debt ratio of firms
Abstract We investigate the impact that bankers on the board have upon a firm's debt ratio, debt to total capital, 1 year subsequent to their appointment. We find that the presence of lending bankersExpand