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Investment and Diversification in the American Whaling Industry

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  • Hilt, Eric

Abstract

This article analyzes the connection between investment decisions and financing arrangements in the nineteenth-century American whaling industry. Managers of whaling ventures shared their risks by selling some equity claims but retained a substantial portion due to moral hazard considerations. As a result, they had little incentive to consider the covariance between their own returns, and those of others, in planning their voyages. This stifled diversity in whaling voyages and increased industry-wide risk. The analysis suggests a link between financial market development, or the extent of risk sharing in financial markets, and the range of economic activities pursued.

Suggested Citation

  • Hilt, Eric, 2007. "Investment and Diversification in the American Whaling Industry," The Journal of Economic History, Cambridge University Press, vol. 67(2), pages 292-314, June.
    • Handle: RePEc:cup:jechis:v:67:y:2007:i:02:p:292-314_00
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    Cited by:

    1. Hilt, Eric, 2006. "Incentives in Corporations: Evidence from the American Whaling Industry," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 197-227, April.
    2. Hilt, Eric, 2008. "The negative trade-off between risk and incentives: Evidence from the american whaling industry," Explorations in Economic History, Elsevier, vol. 45(4), pages 424-444, September.

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