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No need for governance? The impact of corporate governance on valuation, performance and survival of German banks during the 1870s

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  • Carsten Burhop

Abstract

We describe the legal rules underlying corporate governance of banks in Germany during the 1870s as well as the rules of governance fixed in corporate charters collected from a sample of 202 charters for the year 1872. Governance standards were - on average - below the legal default. In particular, voting rights as well as monitoring rights of shareholders were restricted. Most governance provisions did not affect the level of Tobin's Q in 1872, the change of the market-to-book ratio during 1873, and the probability of firm survival until 1880. Yet large banks having adopted a 'one share-one vote' provision and large banks having a governmental concession had a higher Tobin's Q, whereas the reverse holds for small banks. Moreover, the probability of firm survival was larger if small shareholders had voting rights or if shareholders could elect the supervisory board.

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  • Carsten Burhop, 2009. "No need for governance? The impact of corporate governance on valuation, performance and survival of German banks during the 1870s," Business History, Taylor & Francis Journals, vol. 51(4), pages 569-601.
    • Handle: RePEc:taf:bushst:v:51:y:2009:i:4:p:569-601
    DOI: 10.1080/00076790903006463
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    References listed on IDEAS

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    1. Jean Tirole, 2006. "The Theory of Corporate Finance," Post-Print hal-00173191, HAL.
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    Cited by:

    1. Michael Buchner & Tobias A. Jopp, 2019. "Full steam ahead: Insider knowledge, stock trading and the nationalization of the railways in Prussia around 1879," Working Papers 0151, European Historical Economics Society (EHES).

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