Voting Rights, Share Concentration, and Leverage at Nineteenth-Century US Banks
AbstractStudies of corporate governance are concerned with two features of modern shareholding: diffuse ownership and the resulting separation of ownership and control, which potentially leads to managerial self-dealing; and, majority shareholding, which potentially mitigates some managerial self-dealing but opens the door for the expropriation of minority shareholders. This paper provides a study of the second issue for nineteenth-century US corporations. It investigates two related questions. First, did voting rules that limited the control rights of large shareholders encourage diffuse ownership? It did. Second, did diffuse ownership systematically alter bank risk taking? It did. Banks with less concentrated ownership followed policies that reduced liquidity and bankruptcy risk.
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- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G3 - Financial Economics - - Corporate Finance and Governance
- N2 - Economic History - - Financial Markets and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-CDM-2012-02-20 (Collective Decision-Making)
- NEP-HIS-2012-02-20 (Business, Economic & Financial History)
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