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Voting Rights, Share Concentration, and Leverage at Nineteenth-Century US Banks

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  • Howard Bodenhorn

Abstract

Studies 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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17808.

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Date of creation: Feb 2012
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Publication status: published as “Voting Rights, Share Concentration, and Leverage in Nineteenth-Century US Banks.” Journal of Law & Economics 57 (May 2014 forthcoming).
Handle: RePEc:nbr:nberwo:17808

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  1. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  2. Jan Bena & Jan Hanousek, 2006. "Rent extraction by large shareholders: evidence using dividend policy in the Czech Republic," LSE Research Online Documents on Economics 24510, London School of Economics and Political Science, LSE Library.
  3. Bodenhorn, Howard, 2002. "State Banking in Early America: A New Economic History," OUP Catalogue, Oxford University Press, number 9780195147766, Octomber.
  4. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  5. Hilt, Eric, 2008. "When did Ownership Separate from Control? Corporate Governance in the Early Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 68(03), pages 645-685, September.
  6. Meissner, Christopher M., 2005. "Voting rules and the success of connected lending in 19th century New England banks," Explorations in Economic History, Elsevier, vol. 42(4), pages 509-528, October.
  7. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
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Cited by:
  1. Eugene White & Howard Bodenhorn, 2014. "The Evolution Of Bank Boards Of Directors In New York, 1840-1950," Departmental Working Papers 201404, Rutgers University, Department of Economics.

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