Corporate Governance and the Plight of Minority Shareholders in the United States before the Great Depression

Abstract

as well as from the comments of participants in seminars at the Yale Law School, Oxford University, Case Western Reserve University, UCLA, at a meeting of the Greater Chicago Economic History Group, at the Conference on the Political Economy of Financial Markets held at Princeton University, and the NBER Conference on Corruption and Reform. We also grateful for the assistance of Eric Torres in searching newspapers and other periodical sources.The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research.

Never Waste a Good Crisis: An Historical Perspective on Comparative Corporate Governance

“…The explicit goal of these and other policies was to break up large US business groups. The Securities and Exchange Commission, established about this time, made firms more transparent to public investors, likely reducing insiders' scope for self-dealing (Burkart et al 2003) and established most of the shareholder rights La Porta et al (1998) enumerate (Lamoreaux & Rosenthal 2006).…”

“…With qualifications, countries with Common Law legal sustain large stock markets and professionally managed freestanding widely held firms. The longer lists of shareholder rights La enumerate in these economies are historically recent (Franks et al 2005;Lamoreaux & Rosenthal 2006), and thus unlikely to explain such longstanding differences. But other characteristics of the different legal systems might.…”

Historical Financing of Small- and Medium-Sized Enterprises

“…As a result, partnerships suffered from the nontrivial probability that otherwise profitable ventures would suffer costly dissolution. Not surprisingly, they tended to be formed among individuals who knew each other well-that is, who had some kind of deeper personal relationship that could form a basis for trust (Lamoreaux and Rosenthal, 2006).…”

“…Although the latter were only limitedly liable for the enterprise's debts and thus, in the event of insolvency, stood to lose no more than their investments, they had to worry about the possibility that controlling shareholders would expropriate a significant share of their returns. As a result, corporations also required a high degree of trust among members of the firm (Lamoreaux and Rosenthal, 2006).…”

The Global History of Corporate Governance: An Introduction

“…SeeLamoreaux and Rosenthal (2004) regarding the dearth of shareholder rights in the pre-depression US.…”