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

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  • Miguel Cantillo Simon

    (Universidad de Costa Rica)

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.

Suggested Citation

  • Miguel Cantillo Simon, 2017. "Villains or Heroes? Private Banks and Railroads after the Sherman Act," Working Papers 201701, Universidad de Costa Rica, revised Jan 2017.
    • Handle: RePEc:fcr:wpaper:201701
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    References listed on IDEAS

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    Keywords

    Antitrust; Collusion; Corporate Governance; Financial History;
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