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The value of private banks in corporate governance: Evidence from the Armstrong investigation

Author

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  • Cantillo, Miguel

    (IESE Business School)

Abstract

The paper studies the market reaction to the withdrawal of a prominent private bank -Kuhn Loeb- from the board of several firms. The event study shows that although Kuhn Loeb added significant value to the firms where it had a board seat, most of this value came from reduced industry competition. Moreover, it seems that weaker competition manifested itself in monopoly rather than monopsony power. This article analyzes the event's context -the Armstrong Investigation in 1905- and the political currents that eventually prevented private banks from being activist shareholders in the United States.

Suggested Citation

  • Cantillo, Miguel, 2007. "The value of private banks in corporate governance: Evidence from the Armstrong investigation," IESE Research Papers D/700, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0700
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    File URL: http://www.iese.edu/research/pdfs/DI-0700-E.pdf
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    More about this item

    Keywords

    Antitrust; Corporate governance; Financial history;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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