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Villains or Heroes? Private Banks and Railroads after the Sherman Act

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  • Cantillo, Miguel

Abstract

Abstract This paper analyzes and measures the value that American private banks added as directors of non financial companies. Using data between 1874 and 1913, and an event study from 1906, I find that bank directors added about 20% of a firm's market capitalization. Collusive practices encouraged by private banks accounted for 65% of this value, and were the equivalent of creating a three player market among railroads. About 35% of the value added by banks came from better governance. I argue that although policymakers were partly right in sidelining private banks as activist investors, this helped entrench managers.

Suggested Citation

  • Cantillo, Miguel, 2016. "Villains or Heroes? Private Banks and Railroads after the Sherman Act," MPRA Paper 79354, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:79354
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    File URL: https://mpra.ub.uni-muenchen.de/79354/1/MPRA_paper_79354.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Antitrust; Collusion; Corporate Governance; Financial History;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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