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New issues, New Industries and Firm Survival in Interwar Britain


  • David Chambers

    (University of Oxford)


"Was the London Stock Exchange (LSE) little more than a Dickensian den of speculation, or did it make a contribution to industrial development in interwar Britain? Drawing on a new database covering approximately 1400 IPOs on the London Stock Exchange between 1919 and 1938, I show that the new issues market made a material contribution to the financing of capital investment in manufacturing industry, and more than was typical of modern UK corporate finance. However, the new manufacturing industries financed little more of their capital investment from IPOs than did the rest of manufacturing in the interwar period. Since these industries had the most need of external equity finance and were the most vulnerable to asymmetric information problems, they were ultimately the most constrained by the weak disclosure, inadequate investor protection and ineffective underwriting which characterised the interwar period. This weak institutional environment also manifested itself in the disastrous IPO survival rates of the late 1920s. When issue activity rebounded strongly in the following decade, there was a dramatic improvement in survival. This was, at least in part, due to the LSE recognising the need to fill the regulatory vacuum. The 1930s represents an early example of the “light touch” self-regulatory approach for which the LSE has subsequently become renowned."

Suggested Citation

  • David Chambers, 2007. "New issues, New Industries and Firm Survival in Interwar Britain," Working Papers 7002, Economic History Society.
  • Handle: RePEc:ehs:wpaper:7002

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    References listed on IDEAS

    1. J. A. Dowie, 1968. "Growth in the Inter- War Period: Some More Arithmetic," Economic History Review, Economic History Society, vol. 21(1), pages 93-112, April.
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    11. Simon, Carol J, 1989. "The Effect of the 1933 Securities Act on Investor Information and the Performance of New Issues," American Economic Review, American Economic Association, vol. 79(3), pages 295-318, June.
    12. David Chambers, 2007. "Gentlemanly Capitalism Revisited: A Case Study of the Underpricing of Initial Public Offerings on the London Stock Exchange 1946-86," Economics Series Working Papers 253, University of Oxford, Department of Economics.
    13. Jenkinson, T & Corbett, J, 1997. "How is Investment Financed? A Study of Germany, Japan, UK and US," Papers 16, American Institute for Contemporary German Studies-.
    14. Shumway, Tyler, 2001. "Forecasting Bankruptcy More Accurately: A Simple Hazard Model," The Journal of Business, University of Chicago Press, vol. 74(1), pages 101-124, January.
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    JEL classification:

    • N00 - Economic History - - General - - - General


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