Sibylle Lehmann-Hasemeyer

The Political Stock Market in the German Kaiserreich — Do Markets Punish the Extension of the Suffrage to the Benefit of the Working Class? Evidence from Saxony

We approach the issue of the economic effects of democracy by examining which expectations investors held about the effect of democratization in the Kingdom of Saxony in 1896 and 1909. We do this by linking their investment behavior on the Berlin Stock Exchange to political events in Saxony. Here the electoral law was changed twice: In 1896 a very restrictive franchise was introduced, which was abolished in 1909 and replaced by a more democratic electoral law. Our study reveals that the Berlin Stock Exchange reacted to political changes and elections in Saxony. This is an important finding since historical research has claimed that the increased democratization in the German Kaiserreich measured in a larger participation of the population was not accompanied by a larger political influence of the parliaments. Furthermore we can show that for capital owners the possible negative effects seemed to outweigh possible positive effects of democratization. This is the first time that it has been possible to provide quantitative evidence for such antidemocratic sentiments.

The value of active politicians on supervisory boards: evidence from the Berlin stock exchange and the parliament in interwar Germany

ABSTRACT We provide the first overview over all political connections of firms via current Members of Parliament on supervisory boards and board of directors listed on the Berlin stock exchange in the 1920s. In contrast to anecdotal evidence, which suggest that political connections were expected to have a positive effect on firms’ performance, an event study based on the election in December 1924 and May 1928 shows only little evidence that a political connection via a newly elected or re-elected politician generated value. These results complement previous research emphasising that political connections might have mattered less in democracies.