Who Owned Citibank? Familiarity Bias and Business Network Influences on Stock Purchases, 1925-1929

We study factors influencing individuals’ decisions to purchase Citibank stock during the 1920s. Ownership was encouraged by proximity to New York and higher wealth. Lack of familiarity was also an important barrier. The establishment of Citibank branches within a U.S. county or a foreign country was associated with a large increase in share ownership in that location, ceteris paribus. Within the New York City metropolitan area, individual characteristics related to wealth, knowledge, and one’s influence within the New York City Business network increased the probability of becoming a Citibank shareholder. Business associates in the network were an important influence on purchase decisions. Connections with Citibank officers and directors, or with people who had such connections, increased the probability of buying Citibank shares. Connections with other Citibank shareholders also increased the probability of buying Citibank shares. Connections with officers and directors of other large New York banks reduced the probability of owning Citibank, presumably because it increased familiarity with a close substitute for Citibank shares. Network influence reflected more than the transmission of inside information; executives imitated other’s stock buying behavior, which provides evidence of the importance of familiarity for purchases. The role of some network influences, like other identifiable influences, became less important during the price boom of 1928-1929, perhaps reflecting the rising importance of other means of increasing familiarity during the price boom (i.e., media coverage).