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How Good was the Profitability of British Railways, 1870-1912?

  • Brian Mitchell

    (Cambridge University)

  • David Chambers

    (Oxford University)

  • Nicholas Crafts

    (Warwick University)

This paper provides new estimates of the return on capital employed (ROCE) for major British railway companies. It shows that ROCE was generally below the cost of capital after the mid-1870s and fell till the turn of the century. Addressing issues of cost inefficiency could have restored ROCE to an adequate level in the late 1890s but not in 1910. Declines in ROCE hit share prices and returns to shareholders were negative after 1897. Optimal portfolio analysis shows that, whilst railway securities would have had a substantial weight prior to this date, investors would have been justified in rushing to the exits thereafter.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp_859a.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 859.

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Length: 44 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:wrk:warwec:859
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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  1. Nicholas Crafts & Timothy Leunig & Abay Mulatu, 2008. "Were British railway companies well managed in the early twentieth century? -super-1," Economic History Review, Economic History Society, vol. 61(4), pages 842-866, November.
  2. McCloskey, Donald N. & Sandberg, Lars G., 1971. "From damnation to redemption: Judgments on the late victorian entrepreneur," Explorations in Economic History, Elsevier, vol. 9(1), pages 89-108.
  3. Leunig, Timothy, 2006. "Time is Money: A Re-Assessment of the Passenger Social Savings from Victorian British Railways," The Journal of Economic History, Cambridge University Press, vol. 66(03), pages 635-673, September.
  4. William N. Goetzmann & Andrey Ukhov, 2005. "British Investment Overseas 1870-1913: A Modern Portfolio Theory Approach," NBER Working Papers 11266, National Bureau of Economic Research, Inc.
  5. Grossman, Richard S., 2002. "New Indices Of British Equity Prices, 1870 1913," The Journal of Economic History, Cambridge University Press, vol. 62(01), pages 121-146, March.
  6. Fogel, Robert William, 1979. "Notes on the Social Saving Controversy," The Journal of Economic History, Cambridge University Press, vol. 39(01), pages 1-54, March.
  7. Mitchell, B. R., 1964. "The Coming of the Railway and United Kingdom Economic Growth," The Journal of Economic History, Cambridge University Press, vol. 24(03), pages 315-336, September.
  8. Nicholas Crafts & Terence C. Mills & Abay Mulatu, 2005. "Total factor productivity growth on Britain's railways, 1852-1912: a reappraisal of the evidence," Economic History Working Papers 22553, London School of Economics and Political Science, Department of Economic History.
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