IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/10558.html
   My bibliography  Save this paper

The Berlin Stock Exchange in Imperial Germany ? a Market for New Technology?

Author

Abstract

Analysing 474 cases of firms going public in the German capital between 1892 and 1913, we show that innovative firms could rely on the Berlin stock market as a source of financing. The data also reveal that initial public offerings (IPO) of innovative firms were characterized by particularly low underpricing, comparatively high first trading prices, and no long-run underperformance. We interpret these empirical results as evidence for the surprising fact that contemporary investors had rational expectations.

Suggested Citation

  • , & Streb, Jochen, 2015. "The Berlin Stock Exchange in Imperial Germany ? a Market for New Technology?," CEPR Discussion Papers 10558, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10558
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP10558
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Logue, Dennis E., 1973. "On the Pricing of Unseasoned Equity Issues: 1965–1969," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(1), pages 91-103, January.
    2. Carsten Burhop, 2011. "The Underpricing of Initial Public Offerings at the Berlin Stock Exchange, 1870–96," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 11-32, February.
    3. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    4. Schankerman, Mark & Pakes, Ariel, 1986. "Estimates of the Value of Patent Rights in European Countries during the Post-1950 Period," Economic Journal, Royal Economic Society, vol. 96(384), pages 1052-1076, December.
    5. Stoll, Hans R. & Curley, Anthony J., 1970. "Small Business and the New Issues Market for Equities," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 5(3), pages 309-322, September.
    6. Sibylle H. Lehmann, 2014. "Taking firms to the stock market: IPOs and the importance of large banks in imperial Germany, 1896–1913," Economic History Review, Economic History Society, vol. 67(1), pages 92-122, February.
    7. David Chambers & Elroy Dimson, 2009. "IPO Underpricing over the Very Long Run," Journal of Finance, American Finance Association, vol. 64(3), pages 1407-1443, June.
    8. Nuvolari, Alessandro & Tartari, Valentina, 2011. "Bennet Woodcroft and the value of English patents, 1617-1841," Explorations in Economic History, Elsevier, vol. 48(1), pages 97-115, January.
    9. Richter, Ralf & Streb, Jochen, 2011. "Catching-Up and Falling Behind: Knowledge Spillover from American to German Machine Toolmakers," The Journal of Economic History, Cambridge University Press, vol. 71(4), pages 1006-1031, December.
    10. Tom Nicholas, 2011. "Independent invention during the rise of the corporate economy in Britain and Japan," Economic History Review, Economic History Society, vol. 64(3), pages 995-1023, August.
    11. Fohlin,Caroline, 2011. "Finance Capitalism and Germany's Rise to Industrial Power," Cambridge Books, Cambridge University Press, number 9780521396608, October.
    12. Naomi R. Lamoreaux & Daniel M. G. Raff, 1995. "Coordination and Information: Historical Perspectives on the Organization of Enterprise," NBER Books, National Bureau of Economic Research, Inc, number lamo95-1.
    13. Bruno Biais & Peter Bossaerts & Jean-Charles Rochet, 2002. "An Optimal IPO Mechanism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 117-146.
    14. Loughran, Tim & Ritter, Jay R, 1995. "The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    15. Ljungqvist, Alexander P., 1997. "Pricing initial public offerings: Further evidence from Germany," European Economic Review, Elsevier, vol. 41(7), pages 1309-1320, July.
    16. repec:bla:jfinan:v:53:y:1998:i:1:p:285-311 is not listed on IDEAS
    17. repec:bla:jfinan:v:44:y:1989:i:2:p:421-49 is not listed on IDEAS
    18. Streb, Jochen & Wallusch, Jacek & Yin, Shuxi, 2007. "Knowledge spill-over from new to old industries: The case of German synthetic dyes and textiles (1878-1913)," Explorations in Economic History, Elsevier, vol. 44(2), pages 203-223, April.
    19. Jochen Streb & Jörg Baten & Shuxi Yin, 2006. "Technological and geographical knowledge spillover in the German empire 1877–1918," Economic History Review, Economic History Society, vol. 59(2), pages 347-373, May.
    20. 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.
    21. Neuberger, Hugh M. & Stokes, Houston H., 1976. "German Banks and German Growth: Reply," The Journal of Economic History, Cambridge University Press, vol. 36(2), pages 425-427, June.
    22. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
    23. Reilly, Frank K., 1973. "Further Evidence on Short-Run Results for New Issue Investors," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(1), pages 83-90, January.
    24. Re-Jin Guo & Baruch Lev & Charles Shi, 2006. "Explaining the Short- and Long-Term IPO Anomalies in the US by R&D," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3-4), pages 550-579.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Francesco Cinnirella & Jochen Streb, 2017. "Religious Tolerance as Engine of Innovation," CESifo Working Paper Series 6797, CESifo.
    2. Hof, Franz X. & Prettner, Klaus, 2019. "The quest for status and R&D-based growth," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 290-307.
    3. Jansson, Walter, 2018. "Stock markets, banks and economic growth in the UK, 1850–1913," Financial History Review, Cambridge University Press, vol. 25(3), pages 263-296, December.
    4. Lehmann-Hasemeyer, Sibylle H. & Streb, Jochen, 2018. "Discrimination against Foreigners. The Wuerttemberg Patent Law in Administrative Practice," Working Papers 7, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    5. Francesco Cinnirella & Jochen Streb, 2017. "The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia," Journal of Economic Growth, Springer, vol. 22(2), pages 193-227, June.
    6. Lehmann-Hasemeyer, Sibylle & Wahl, Fabian, 2017. "Savings Banks and the Industrial Revolution in Prussia Supporting Regional Development with Public Financial Institutions," CEPR Discussion Papers 12500, C.E.P.R. Discussion Papers.
    7. Carsten Burhop & Sibylle Lehmann-Hasemeyer, 2016. "The Berlin stock exchange and the geography of German stock markets in 1913," European Review of Economic History, European Historical Economics Society, vol. 20(4), pages 429-451.
    8. Sibylle Lehmann-Hasemeyer & Jochen Streb, 2016. "The Berlin Stock Exchange in Imperial Germany: A Market for New Technology?," American Economic Review, American Economic Association, vol. 106(11), pages 3558-3576, November.
    9. Jens Günther, 2017. "Capital market effects around dividend announcements: an analysis of the Berlin stock exchange in 1895," Accounting History Review, Taylor & Francis Journals, vol. 27(3), pages 249-278, September.
    10. Lehmann-Hasemeyer, Sibylle & Streb, Jochen, 2017. "Does Social Security crowd out Private Savings? The Case of Bismarck’s System of Social Insurance," IBF Paper Series 06-17, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sibylle H. Lehmann, 2014. "Taking firms to the stock market: IPOs and the importance of large banks in imperial Germany, 1896–1913," Economic History Review, Economic History Society, vol. 67(1), pages 92-122, February.
    2. Sibylle Lehmann, 2010. "Explaining the performance of Initial Public Offerings in Imperial Germany, 1897-1914: the role of reputation," Working Papers 10005, Economic History Society.
    3. Sibylle Lehmann, 2011. "Taking Firms to the Stock Market: IPOs and the Importance of Universal Banks in Imperial Germany 1896-1913," Cologne Economic History papers 9, University of Cologne, Department of Economic and Business History, revised Mar 2011.
    4. Sibylle Lehmann-Hasemeyer & Jochen Streb, 2016. "The Berlin Stock Exchange in Imperial Germany: A Market for New Technology?," American Economic Review, American Economic Association, vol. 106(11), pages 3558-3576, November.
    5. Oehler, Andreas & Rummer, Marco & Smith, Peter N., 2004. "IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany," Discussion Papers 26, University of Bamberg, Chair of Finance.
    6. Goergen, Marc & Gounopoulos, Dimitrios & Koutroumpis, Panagiotis, 2021. "Do multiple credit ratings reduce money left on the table? Evidence from U.S. IPOs," Journal of Corporate Finance, Elsevier, vol. 67(C).
    7. Klova, Valeriia, 2017. "IPO underpricing: What about the shipping sector?," Journal of Multinational Financial Management, Elsevier, vol. 42, pages 95-115.
    8. Lehmann, Timo & Weber, Matthias, 2021. "IPO Underpricing and Aftermarket Price Accuracy: Auctions vs. Bookbuilding in Japan," SocArXiv sa385, Center for Open Science.
    9. Buchner, Michael, 2018. "The Berlin Bourse in the London mirror: An asymmetric comparison of microstructures and the role of Germany's large banks in securities trading, c. 1860-1914," IBF Paper Series 01-18, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.
    10. Agathee, Ushad Subadar & Sannassee, Raja Vinesh & Brooks, Chris, 2012. "The underpricing of IPOs on the Stock Exchange of Mauritius," Research in International Business and Finance, Elsevier, vol. 26(2), pages 281-303.
    11. Trauten, Andreas, 2004. "Zur Effizienz von Wertpapieremissionen über Internetplattformen," Working Papers 8, University of Münster, Competence Center Internet Economy and Hybrid Systems, European Research Center for Information Systems (ERCIS).
    12. Santos, Francisco, 2017. "IPO market timing with uncertain aftermarket retail demand," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 247-266.
    13. Engelen, Peter-Jan & van Essen, Marc, 2010. "Underpricing of IPOs: Firm-, issue- and country-specific characteristics," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1958-1969, August.
    14. Qi Deng & Zhong-guo Zhou, 2016. "The pricing of first day opening price returns for ChiNext IPOs," Review of Quantitative Finance and Accounting, Springer, vol. 47(2), pages 249-271, August.
    15. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    16. Sascha Füllbrunn & Tibor Neugebauer & Andreas Nicklisch, 2020. "Underpricing of initial public offerings in experimental asset markets," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1002-1029, December.
    17. Agoraki, Maria-Eleni K. & Gounopoulos, Dimitrios & Kouretas, Georgios P., 2022. "U.S. banks’ IPOs and political money contributions," Journal of Financial Stability, Elsevier, vol. 63(C).
    18. Dorsman, André & Gounopoulos, Dimitrios, 2013. "European Sovereign Debt Crisis and the performance of Dutch IPOs," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 308-319.
    19. Josef Schuster, 2003. "The Cross-Section of European IPO Returns," FMG Discussion Papers dp460, Financial Markets Group.
    20. Timo Lehmann & Matthias Weber, 2023. "Auctions versus bookbuilding: The effects of IPO regulation in Japan," The Financial Review, Eastern Finance Association, vol. 58(1), pages 117-141, February.

    More about this item

    Keywords

    Industrialisation; Innovation; Ipo; Stock exchange;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:10558. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.