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The Great Pyramids of America: A Revised History of US Business Groups, Corporate Ownership and Regulation, 1930-1950

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  • Eugene Kandel
  • Konstantin Kosenko
  • Randall Morck
  • Yishay Yafeh

Abstract

Most listed firms are freestanding in the U.S, while listed firms in other countries often belong to business groups: lasting structures in which listed firms control other listed firms. Hand-collected historical data illuminate how the present ownership structure of the United States arose: (1) Until the mid-20th century, US corporate ownership was unexceptional: large pyramidal groups dominated many industries; (2) About half of these resembled groups elsewhere today in being industrially diversified and family controlled; but the others were tightly focused and had widely held apex firms; (3) US business groups disappeared gradually, primarily in the 1940s, and by 1950 were largely gone; Their demise took place against growing concerns that they posed a threat to competition and even to society; (4) The data link the disappearance of business groups to reforms that targeted them explicitly – the Public Utility Holding Company Act (1935) and rising intercorporate dividend taxation (after 1935), or indirectly – enhanced investor protection (after 1934), the Investment Company Act (1940) and escalating estate taxes. Banking reforms and rejuvenated antitrust enforcement may have indirectly contributed too. These reforms, sustained in a lasting anti-big business climate, promoted the dissolution of existing groups and discouraged the formation of new ones. Thus, a multi-pronged reform agenda, sustained by a supportive political climate, created an economy of freestanding firms.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:19691
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    References listed on IDEAS

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    Cited by:

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    2. Randall Morck & Bernard Yeung, 2017. "East Asian Financial and Economic Development," Working Papers id:12112, eSocialSciences.
    3. Gur Aminadav & Elias Papaioannou, 2020. "Corporate Control around the World," Journal of Finance, American Finance Association, vol. 75(3), pages 1191-1246, June.
    4. Ashish Arora & Sharon Belenzon & Andrea Patacconi & Jungkyu Suh, 2019. "The Changing Structure of American Innovation: Some Cautionary Remarks for Economic Growth," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 39-93, National Bureau of Economic Research, Inc.
    5. Mark J. Flannery & Jan Hanousek & Anastasiya Shamshur & Jiri Tresl, 2020. "M&A Activity and the Capital Structure of Target Firms," CERGE-EI Working Papers wp661, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    6. Cho, Duksang, 2019. "Pyramidal Business Groups and Asymmetric Financial Frictions," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 41(3), pages 1-38.
    7. Dino Gerardi & Edoardo Grillo & Ignacio Monzón, 2016. "The Perils of Friendly Oversight," Carlo Alberto Notebooks 630, Collegio Carlo Alberto.

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    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • P12 - Economic Systems - - Capitalist Systems - - - Capitalist Enterprises

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