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The Development of Corporate Financial Markets in Britain and the United States, 1600–1914: Overcoming Asymmetric Information

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  • Baskin, Jonathan Barron

Abstract

In the following article, Professor Baskin traces the evolution of corporate finance from its beginnings among the British trading companies to its modern transformation in the United States at the end of the nineteenth century. He argues that deductive theoretical analyses based on perfect capital markets cannot always explain actual historical developments, and that financial history generally has not received sufficient attention from either economic theorists or historians. Professor Baskin suggests that financial markets developed as they did largely as a result of efforts to minimize the problems created by the asymmetry of information between company insiders and potential investors.

Suggested Citation

  • Baskin, Jonathan Barron, 1988. "The Development of Corporate Financial Markets in Britain and the United States, 1600–1914: Overcoming Asymmetric Information," Business History Review, Cambridge University Press, vol. 62(2), pages 199-237, July.
    • Handle: RePEc:cup:buhirw:v:62:y:1988:i:02:p:199-237_05
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    Cited by:

    1. Bayer, Christian & Burhop, Carsten, 2009. "Corporate governance and incentive contracts: Historical evidence from a legal reform," Explorations in Economic History, Elsevier, vol. 46(4), pages 464-481, October.
    2. Hoff Karla, 2010. "Dysfunctional Finance: Positive Shocks and Negative Outcomes," Journal of Globalization and Development, De Gruyter, vol. 1(1), pages 1-24, January.
    3. Atack, Jeremy & Rousseau, Peter L., 1999. "Business Activity and the Boston Stock Market, 1835-1869," Explorations in Economic History, Elsevier, vol. 36(2), pages 144-179, April.
    4. Charles Calomiris, 1995. "The Costs of Rejecting Universal Banking: American Finance in the German Mirror, 1870-1914," NBER Chapters, in: Coordination and Information: Historical Perspectives on the Organization of Enterprise, pages 257-322, National Bureau of Economic Research, Inc.
    5. Carola Frydman & Eric Hilt, 2014. "Investment Banks as Corporate Monitors in the Early 20th Century United States," NBER Working Papers 20544, National Bureau of Economic Research, Inc.
    6. Chen, Zhuo & He, Zhiguo & Liu, Chun, 2020. "The financing of local government in China: Stimulus loan wanes and shadow banking waxes," Journal of Financial Economics, Elsevier, vol. 137(1), pages 42-71.
    7. Turner, John D., 2014. "Financial history and financial economics," QUCEH Working Paper Series 14-03, Queen's University Belfast, Queen's University Centre for Economic History.
    8. Rousseau, Peter L., 2011. "The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866–1897," The Journal of Economic History, Cambridge University Press, vol. 71(4), pages 976-1005, December.
    9. Mike Burkart & Salvatore Miglietta & Charlotte Ostergaard, 2023. "Why Do Boards Exist? Governance Design in the Absence of Corporate Law," The Review of Financial Studies, Society for Financial Studies, vol. 36(5), pages 1788-1836.
    10. Yoonsoo Nam & Scott J Niblock & Elisabeth Sinnewe & Keith Jakob, 2018. "Do corporate directors ‘heap’ dividends? Evidence on dividend rounding and information uncertainty in Australian firms," Australian Journal of Management, Australian School of Business, vol. 43(3), pages 421-438, August.
    11. Richard W. Kopcke, 1991. "The capitalization and portfolio risk of insurance companies," Working Papers 91-3, Federal Reserve Bank of Boston.
    12. Richard W. Kopcke, 1992. "Tobin's Q, economic rents, and the optimal stock of capital," Working Papers 92-3, Federal Reserve Bank of Boston.
    13. Nabaraj Adhikari, Ph.D., 2015. "Determinants of Corporate Dividend Payout in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 27(2), pages 53-74, October.
    14. Annaert, Jan & Buelens, Frans & De Ceuster, Marc J.K., 2012. "New Belgian Stock Market Returns: 1832–1914," Explorations in Economic History, Elsevier, vol. 49(2), pages 189-204.
    15. Waldenström, Daniel, 2014. "Swedish Stock and Bond Returns, 1856–2012," Working Paper Series 1027, Research Institute of Industrial Economics.
    16. Michael D. Bordo & Barry Eichengreen & Jongwoo Kim, 1998. "Was There Really an Earlier Period of International Financial Integration Comparable to Today?," NBER Working Papers 6738, National Bureau of Economic Research, Inc.
    17. Allen, Franklin, et al., 2010. "How Important Historically Were Financial Systems for Growth in the U.K., U.S., Germany, and Japan?," Working Papers 10-27, University of Pennsylvania, Wharton School, Weiss Center.
    18. Richard W. Kopcke, 2000. "Deposit insurance, capital requirements, and financial stability," Working Papers 00-3, Federal Reserve Bank of Boston.
    19. Nabaraj Adhikari, Ph.D., 2015. "Determinants of Corporate Dividend Payout in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 27(2), pages 1-22, October.
    20. Castillo, Augusto & Rubio, German & Jakob, Keith, 2020. "Currency magnitude and cognitive biases: Evidence of dividend rounding in Latin America," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    21. Siepel, Josh & Nightingale, Paul, 2014. "Anglo-Saxon governance: Similarities, difference and outcomes in a financialised world," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 25(1), pages 27-35.
    22. Daniel Raff & Peter Temin, 1991. "Business History and Recent Economic Theory: Imperfect Information, Incentives, and the Internal Organization of Firms," NBER Chapters, in: Inside the Business Enterprise: Historical Perspectives on the Use of Information, pages 7-40, National Bureau of Economic Research, Inc.

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