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Did J. P. Morgan's Men Add Liquidity? Corporate Investment, Cash Flow, and Financial Structure at the Turn of the Twentieth Century

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  • Ramirez, Carlos D

Abstract

This article presents evidence suggesting that the relationship that existed between the partnership of J. P. Morgan and its client firms partially resolved the latter's external financing problems by diminishing the principal-agent and asymmetric information problems. The author estimates and compares investment regression equations for a sample of Morgan-affiliated companies and a control group of nonaffiliated companies. The econometric results seem to indicate that companies not affiliated to the house of Morgan were liquidity constrained. Copyright 1995 by American Finance Association.

Suggested Citation

  • Ramirez, Carlos D, 1995. " Did J. P. Morgan's Men Add Liquidity? Corporate Investment, Cash Flow, and Financial Structure at the Turn of the Twentieth Century," Journal of Finance, American Finance Association, vol. 50(2), pages 661-678, June.
  • Handle: RePEc:bla:jfinan:v:50:y:1995:i:2:p:661-78
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    Cited by:

    1. Fohlin, Caroline, 1998. "Fiduciariand Firm Liquidity Constraints: The Italian Experience with German-Style Universal Banking," Explorations in Economic History, Elsevier, vol. 35(1), pages 83-107, January.
    2. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    3. Perotti, Enrico C. & Gelfer, Stanislav, 2001. "Red barons or robber barons? Governance and investment in Russian financial-industrial groups," European Economic Review, Elsevier, vol. 45(9), pages 1601-1617, October.
    4. Charles W. Calomiris & Stephen H. Haber, 2014. "Interest Groups and the Glass-Steagall Act," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(4), pages 14-18, 01.
    5. Carola Frydman & Eric Hilt, 2014. "Investment Banks as Corporate Monitors in the Early 20th Century United States," NBER Working Papers 20544, National Bureau of Economic Research, Inc.
    6. Grossman, Richard S. & Imai, Masami, 2016. "Taking the lord's name in vain: The impact of connected directors on 19th century British banks," Explorations in Economic History, Elsevier, vol. 59(C), pages 75-93.
    7. repec:ces:ifodic:v:11:y:2014:i:4:p:19105950 is not listed on IDEAS
    8. Eugene Kandel & Konstantin Kosenko & Randall Morck & Yishay Yafeh, 2013. "The Great Pyramids of America: A Revised History of US Business Groups, Corporate Ownership and Regulation, 1930-1950," NBER Working Papers 19691, National Bureau of Economic Research, Inc.
    9. Bricker, Robert & Chandar, Nandini, 2000. "Where Berle and Means went wrong: a reassessment of capital market agency and financial reporting," Accounting, Organizations and Society, Elsevier, vol. 25(6), pages 529-554, August.
    10. Jaleel Ahmed & Jaweria Khalid, 2016. "Determinants of Bank Loan Availability: Evidence From Pakistani Non-Financial Firms," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 61-72, March.
    11. Shen, Chung-Hua & Wang, Chien-An, 2005. "Does bank relationship matter for a firm's investment and financial constraints? The case of Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 13(2), pages 163-184, March.
    12. Ayub Mehar, 2005. "Impacts of equity financing on liquidity position of a firm," Applied Financial Economics, Taylor & Francis Journals, vol. 15(6), pages 425-438.
    13. Burak Güner, A. & Malmendier, Ulrike & Tate, Geoffrey, 2008. "Financial expertise of directors," Journal of Financial Economics, Elsevier, vol. 88(2), pages 323-354, May.
    14. VAN OVERFELT, Wouter & ANNAERT, Jan & DE CEUSTER, Marc & DELOOF, Marc, 2007. "Do universal banks create value? Universal bank affiliation and company performance in Belgium, 1905-1909," Working Papers 2007001, University of Antwerp, Faculty of Applied Economics.
    15. Deloof, Marc & Vermoesen, Veronique, 2016. "The value of corporate boards during the Great Depression in Belgium," Explorations in Economic History, Elsevier, vol. 62(C), pages 108-123.
    16. Efraim Benmelech & Nittai K. Bergman & Amit Seru, 2011. "Financing Labor," NBER Working Papers 17144, National Bureau of Economic Research, Inc.
    17. Egerer, Roland, 1995. "Capital markets, financial intermediaries, and corporate governance : an empirical assessment of the top ten voucher funds in the Czech Republic," Policy Research Working Paper Series 1555, The World Bank.
    18. Miguel A. Ferreira & Pedro Matos, 2012. "Universal Banks and Corporate Control: Evidence from the Global Syndicated Loan Market," Review of Financial Studies, Society for Financial Studies, vol. 25(9), pages 2703-2744.
    19. Félix López-Iturriaga & Juan Rodríguez-Sanz, 2001. "Ownership Structure, Corporate Value and Firm Investment: A Simultaneous Equations Analysis of Spanish Companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 5(2), pages 179-204, June.
    20. Christophe Volonté & Pascal Gantenbein, 2016. "Directors’ human capital, firm strategy, and firm performance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(1), pages 115-145, March.

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