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A Historical Overview of Joint Stock Company Births in Greece (1830-1909): Coincidence, causality and determinants

Pepelasis, Ioanna Sapfo and Emmanouilidi, Elpianna (2013): A Historical Overview of Joint Stock Company Births in Greece (1830-1909): Coincidence, causality and determinants.

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Research on the history of the joint stock company has focused on advanced capitalist countries. Among the latecomer countries to be neglected is Greece. This paper is the outcome of a research project which seeks to redress this omission by constructing a historical data base from the charters of Greek Joint Stock Company (JSC) start-ups. We examine here through historical/qualitative and quantitative analysis the data for the period between 1830 and 1909. Our main findings are that:

1. The joint stock company in Greece came with nation building. Incorporation represented a small number of companies in absolute terms, but a relatively large capital commitment. It was emblematic of ‘big business units’ in what was basically a peasant economy.

2. Although the JSC was introduced from above, the legal framework for incorporation failed to evolve and adapt. Other forces in the socio-economic environment drove its evolution. Namely, the shift of JSC births from a period of incubation and ‘monoculture’ to a period (time-thread) of expanding horizons commencing circa 1870.

3. Joint stock company births came in waves. The timing of the 1870 cut-off point and of the other peaks in births coincided with exogenous so to speak shocks, among which institutional /political changes, and or geographical expansion played a primary role. These raised business expectations and hence increased the supply of surplus capital towards avant-garde activities (i.e. the nascent corporate sector). It could be argued that Joint Stock Company founders seemed to prefer to ride a tide- their entrepreneurial drive being motivated by (and perhaps further feeding) ‘rising expectations’.

4. Preliminary time series analysis indicates that GDP is a trend stationary process with a low deterministic trend component while paid-in capital is a difference stationary process. Capital persistence indicates negative association implying caution on the part of the investors given the uncertain economic context. Despite the absence of a Slutsky effect, the GDP series may have been induced by applying Kuznets transformations to an otherwise white noise process. In fact, the spectral density of GDP exhibits a long-cycle of about 18 years at the lowest frequency with subsequent dampening.

5. Further analysis provides evidence in favour of an equilibrium relationship between gross incorporation as measured by paid in capital commitment and GDP. Short-run dynamics imply that the propensity to commit capital is positive and equal to 2.26 in case of total and 2.99 in case of agricultural GDP. Moreover, it is paid-in capital which provides evidence in favour of equilibrium adjustment as opposed to GDP. Given our preliminary finding of a deterministic trend in paid-in capital, our evidence of co-integration is restricted to the stochastic trend component of the series.

6. Despite the lack of an underlying structural economic model for gross incorporation and the macro-economy, we may exploit the efficient markets hypothesis, according to which the structural equilibrium adjustment parameter of paid-in capital should equal unity. Our empirical findings indicate that it is negative and close to one. Thus, even though economic context matters, it is paid-in capital which drives expectations.

7. There is evidence that paid-in capital is Granger-caused by GDP. Causality is mutual in case of agricultural GDP (yet marginally significant at the 10% level) since agricultural GDP is Granger-caused by paid-in capital as well. This finding implies transformation of agricultural surplus into capital value despite the rather uncertain economic environment.

8. Paid-in capital is the primary determinant of gross incorporation. There is evidence that an increase in paid-in capital increases the probability of JSC births in a year by 21-23% with associated elasticity of around 3. Moreover, there is evidence of over-dispersion in the Poisson conditional mean of 44.3%. Following our previous analysis, the source of this over-dispersion is the domination of the sectoral distribution of JSC births by financial services.

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