Graeme G. Acheson

Rule Britannia!: British Stock Market Returns, 1825-1870

This article presents a new series of monthly equity returns for the British stock market for the period 1825-1870. In addition to calculating capital appreciation and dividend yields, the article also estimates the effect of survivorship bias on returns. Three notable findings emerge from this study. First, stock market returns in the 1825-1870 period are broadly similar for Britain and the United States, although the British market is less risky. Second, real returns in the 1825-1870 period are higher than in subsequent epochs of British history. Third, unlike the modern era, dividends are the most important component of returns.

The Impact of Limited Liability on Ownership and Control: Irish Banking, 1877-1914

Limited liability is regarded as the sine qua non of the modern company, enabling firms to raise capital from a broad spectrum of investors who have well-diversified portfolios. This article uses the ownership records of an Irish bank, which converted to limited liability in 1883, to explore the impact of introducing limited liability upon ownership and control. We find that ownership becomes more dispersed amongst individuals from a broader social and geographical spectrum. However, there appears to be little impact on portfolio diversification. Furthermore, although limited liability appears to contribute to the rise of the professional director, the evidence suggests that managerial incentives may have been weakened.

The character and denomination of shares in the Victorian equity market

The seminal work of J. B. Jefferys highlighted two unusual features of the Victorian equity market, namely high share denomination and uncalled capital. This article examines the extent to which publicly traded company stocks in the nineteenth century had these features. It also analyses the effect of these features on stock returns using monthly data for the London Stock Market over the period 1825–70. We find that stocks with unpaid capital earned a higher return, which is consistent with investors being rewarded for the risk of a call on their personal assets. We also find that stocks with a high share denomination earned a lower return, which is consistent with the view that this feature was conducive to superior corporate governance.

DOES LIMITED LIABILITY MATTER?: EVIDENCE FROM NINETEENTH-CENTURY BRITISH BANKING *

The superiority of the corporation over other organizational forms is typically attributed to the fact that every owner has limited liability. The widely-held, but empirically unsubstantiated, view is that the main advantage of limited liability over extended shareholder liability is that the enforcement costs of the latter generally impedes the tradability and liquidity of stock. We use the rich shareholder-liability experience of nineteenth-century British banking to test this standard view. As well as exploring the means by which unlimited liability was enforced, we examine the impact of liability regimes on the tradability and liquidity of stock. Our evidence suggests that liability rules appear to be irrelevant from the perspective of stock tradability and liquidity.

Corporate ownership and control in Victorian Britain

Using ownership and control data for 890 firm-years, this paper examines the concentration of capital and voting rights in British companies in the second half of the nineteenth century. We find that both capital and voting rights were diffuse by modern-day standards. This implies that ownership was separated from control in the UK much earlier than previously thought, and given that it occurred in an era with weak shareholder protection law, it undermines the influential law and finance hypothesis. We also find that diffuse ownership is correlated with large boards, a London head office, non-linear voting rights, and shares traded on multiple markets.

Organisational flexibility and governance in a civil-law regime: Scottish partnership banks during the Industrial Revolution

Unlike their English counterparts, Scottish partnership banks during the Industrial Revolution operated under partnership law which was similar to the French société en commandite. The article suggests that the definitive feature of this partnership law was that it permitted partnerships to separate ownership from control and stock to be traded. Archival evidence also suggests that Scottish partnership banks had mechanisms to ameliorate potential insider opportunism arising from the separation of ownership from control. The available evidence also suggests that the ability of Scottish banks to separate ownership from control may have contributed to the relative stability of the banking system.

Happy hour followed by hangover: financing the UK brewery industry, 1880-1913

ABSTRACT In the last 15 years of the nineteenth century c.300 British brewers incorporated and floated securities on the stock market. Subsequently, in the 1900s, the industry suffered a long-lived hangover. In this article, we establish the stylised facts of this transformation and estimate the gains enjoyed by brewery investors during the boom as well as the losses suffered by investors during the bust of the 1900s. However, not all brewery equity shares suffered alike. We find that post-1900 performance correlates positively with capital-market discipline and good corporate governance and negatively with family control, but does not correlate with indebtedness.

Active Controllers or Wealthy Rentiers?: Large Shareholders in Victorian Public Companies

This article addresses the issue of whether large shareholders in Victorian public companies were active in the control of companies or were simply wealthy rentiers. Using ownership records for 890 firm-years, we examine the control rights, socio-occupational background, and wealth of large shareholders. We find that many large shareholders had limited voting rights and neither they nor family members were directors. This implies that the majority of public companies in the second half of the nineteenth century cannot be characterized as family companies and that large shareholders are better viewed as wealthy gentlemen capitalists rather than entrepreneurs.

Corporate Ownership, Control, and Firm Performance in Victorian Britain

Scholars have long debated whether ownership matters for firm performance. The standard view regarding Victorian Britain is that family-controlled companies had a detrimental effect on performance. In this article, we examine this view using a hand-collected corporate ownership dataset. Our main finding is that it was not necessarily the broad structure of corporate ownership that mattered for performance, but whether family blockholders had a governance role. Large active blockholders tended to increase operating performance, implying that they reduced managerial expropriation. Contrastingly, we find that directors who were independent of large owners were more likely to increase shareholder value.

Who Financed the Expansion of the Equity Market? Shareholder Clienteles in Victorian Britain

Abstract Who financed the great expansion of the Victorian equity market, and what attracted them to invest? Using data on 453 firm-years and over 172,000 shareholders, we find that the largest providers of capital were rentiers, men with no formal occupation who relied on investment income. We also see a substantial growth in women investors as time progressed. In terms of clientele effects, we find that rentiers invested in large firms, whilst businessmen were the venture capitalists of young, regional enterprises. Women and the middle classes preferred safe investments, whilst financiers and institutional investors were speculators in foreign companies. Our results may help to explain the growth of new types of assets catering for particular clienteles, and the development of managerial policies on dividends and share issues.