Villains or Heroes? Private Banks and Railroads after the Sherman Act

Cantillo, Miguel (2016): Villains or Heroes? Private Banks and Railroads after the Sherman Act.

Abstract

Abstract This paper analyzes and measures the value that American private banks added as directors of non financial companies. Using data between 1874 and 1913, and an event study from 1906, I find that bank directors added about 20% of a firm's market capitalization. Collusive practices encouraged by private banks accounted for 65% of this value, and were the equivalent of creating a three player market among railroads. About 35% of the value added by banks came from better governance. I argue that although policymakers were partly right in sidelining private banks as activist investors, this helped entrench managers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Antitrust; Collusion; Corporate Governance; Financial History
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; K - Law and Economics > K2 - Regulation and Business Law > K21 - Antitrust Law; L - Industrial Organization > L4 - Antitrust Issues and Policies > L41 - Monopolization ; Horizontal Anticompetitive Practices; N - Economic History > N2 - Financial Markets and Institutions > N21 - U.S. ; Canada: Pre-1913

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