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Enforcing Property Rights Through Reputation: Mexico'S Early Industrialization, 1878–1913

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  • Maurer, Noel
  • Sharma, Tridib

Abstract

Mexico's initial industrialization was based on firms that were “grouped†: that is, linked to other firms through close affiliations with a common bank. Most explanations for the prevalence of groups are based on increasing returns or missing formal capital markets. We propose a simpler explanation that better fits the facts of Mexican history. In the absence of secure property rights, tangible collateral could not credibly be offered to creditors; but there remained the possibility of using reputation as a form of intangible collateral. In such circumstances, firms had incentives to group together for purposes of mutual monitoring and insurance.

Suggested Citation

  • Maurer, Noel & Sharma, Tridib, 2001. "Enforcing Property Rights Through Reputation: Mexico'S Early Industrialization, 1878–1913," The Journal of Economic History, Cambridge University Press, vol. 61(4), pages 950-973, December.
    • Handle: RePEc:cup:jechis:v:61:y:2001:i:04:p:950-973_04
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    Cited by:

    1. Randall Morck, 2011. "Finance and Governance in Developing Economies," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 375-406, December.
    2. Noel Maurer & Stephen Haber, 2007. "Related Lending: Manifest Looting or Good Governance? Lessons from the Economic History of Mexico," NBER Chapters, in: The Decline of Latin American Economies: Growth, Institutions, and Crises, pages 213-242, National Bureau of Economic Research, Inc.
    3. Yan-Jie Yang & Jungpao Kang & Ruey-Ching Lin & Joshua Ronen, 2016. "Auditor selection within a business group: evidence from Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 46(2), pages 195-215, February.
    4. Tarun Khanna & Yishay Yafeh, 2007. "Business Groups in Emerging Markets: Paragons or Parasites?," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 331-372, June.

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