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Wall Street's First Corporate Governance Crisis: The Panic of 1826

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  • Eric Hilt

Abstract

In July of 1826, several prominent Wall Street firms abruptly went bankrupt, amid scandalous revelations of fraudulent financial practices by their management. Although mostly forgotten today, these events represented a watershed in the early development of the corporation laws and investor protections governing Wall Street: in the aftermath of the scandals, New York State enacted an extensive package of legislation designed to protect the interests of investors. These statutes were some of the the very first of their kind, and had a lasting influence. This paper analyzes the causes of the failures, and the evolution of the law in response. The analysis highlights the critical role played by scandal-driven legislation in the evolution of investor protections and financial regulations.

Suggested Citation

  • Eric Hilt, 2009. "Wall Street's First Corporate Governance Crisis: The Panic of 1826," NBER Working Papers 14892, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14892
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    Citations

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    Cited by:

    1. Muravyev, Alexander, 2009. "Investor Protection and the Value of Shares: Evidence from Statutory Rules Governing Variations of Shareholders' Class Rights in Russia," IZA Discussion Papers 4669, Institute for the Study of Labor (IZA).
    2. Eric Hilt, 2014. "History of American Corporate Governance: Law, Institutions, and Politics," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 1-21, December.
    3. Charles W. Calomiris, 2009. "Banking Crises and the Rules of the Game," Working Papers 2009/14, Czech National Bank, Research Department.
    4. Alexander Muravyev, 2009. "Investor Protection and Share Prices: Evidence from Statutory Rules Governing Variations of Shareholders' Class Rights in Russia," Discussion Papers of DIW Berlin 865, DIW Berlin, German Institute for Economic Research.
    5. Howard Bodenhorn & Eugene N. White, 2014. "The Evolution of Bank Boards of Directors in New York, 1840–1950," NBER Chapters,in: Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, pages 107-145 National Bureau of Economic Research, Inc.
    6. Berezinets Irina & Ilina Yulia & Muravyev Alexander, 2011. "Owners, Boards, Managers and the Private Benefits of Control: A Study of Dual Class Stock Firms in an Emerging Market," EERC Working Paper Series 11/12e, EERC Research Network, Russia and CIS.
    7. repec:eee:finsta:v:33:y:2017:i:c:p:366-379 is not listed on IDEAS
    8. Berezinets, Irina & Ilina, Yulia & Muravyev, Alexander, 2011. "CEO and Board Characteristics as Determinants of Private Benefits of Control: Evidence from the Russian Stock Exchange," IZA Discussion Papers 6256, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G3 - Financial Economics - - Corporate Finance and Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N81 - Economic History - - Micro-Business History - - - U.S.; Canada: Pre-1913

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