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Is Regulation Essential to Stock Market Development? Going Public in London and Berlin, 1900-1913

Author

Listed:
  • Carsten Burhop

    () (Max Planck Institute for Research on Collective Goods, Bonn and University of Cologne)

  • David Chambers

    () (Judge Business School, University of Cambridge)

  • Brian Cheffins

    () (Faculty of Law, University of Cambridge)

Abstract

This study of initial public offerings (IPOs) carried out on the Berlin and London stock exchanges between 1900 and 1913 casts doubt on the received “law and finance” wisdom that legally mandated investor protection is pivotal to the development of capital markets. IPOs that resulted in official quotations on the London Stock Exchange performed as well as Berlin IPOs despite the Berlin market being more extensively regulated than the laissez faire London market. Moreover, the IPO failure rate on these two stock markets was lower than it was with better regulated US IPOs later in the 20th century.

Suggested Citation

  • Carsten Burhop & David Chambers & Brian Cheffins, 2011. "Is Regulation Essential to Stock Market Development? Going Public in London and Berlin, 1900-1913," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2011_15, Max Planck Institute for Research on Collective Goods.
  • Handle: RePEc:mpg:wpaper:2011_15
    as

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    File URL: http://www.coll.mpg.de/pdf_dat/2011_15online.pdf
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    References listed on IDEAS

    as
    1. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2011. "The U.S. Left Behind: The Rise of IPO Activity around the World," Working Paper Series 2011-8, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    2. Rafael Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2006. "What Works in Securities Laws?," Journal of Finance, American Finance Association, vol. 61(1), pages 1-32, February.
    3. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    4. David Chambers & Elroy Dimson, 2009. "IPO Underpricing over the Very Long Run," Journal of Finance, American Finance Association, vol. 64(3), pages 1407-1443, June.
    5. Mathias Siems & Priya Lele, 2006. "Shareholder Protection: A Leximetric Approach," Working Papers wp324, Centre for Business Research, University of Cambridge.
    6. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    7. Fohlin,Caroline, 2011. "Finance Capitalism and Germany's Rise to Industrial Power," Cambridge Books, Cambridge University Press, number 9780521396608, April.
    8. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
    9. Fohlin, Caroline, 2002. "Regulation, taxation and the development of the German universal banking system, 1884 1913," European Review of Economic History, Cambridge University Press, vol. 6(02), pages 221-254, August.
    10. Burhop, Carsten & Wolff, Guntram B., 2005. "A Compromise Estimate of German Net National Product, 1851 1913, and its Implications for Growth and Business Cycles," The Journal of Economic History, Cambridge University Press, vol. 65(03), pages 613-657, September.
    11. repec:hrv:faseco:30728041 is not listed on IDEAS
    12. Elizabeth Demers & Philip Joos, 2007. "IPO Failure Risk," Journal of Accounting Research, Wiley Blackwell, vol. 45(2), pages 333-371, May.
    13. Holmen, Martin & Hogfeldt, Peter, 2004. "A law and finance analysis of initial public offerings," Journal of Financial Intermediation, Elsevier, vol. 13(3), pages 324-358, July.
    14. Julian Franks & Colin Mayer & Hannes Wagner, 2006. "The Origins of the German Corporation - Finance, Ownership and Control," Review of Finance, European Finance Association, vol. 10(4), pages 537-585, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Regulation; Financial history; Law and finance; initial public offering; investor protection;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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