Working Paper: NBER ID: w13093
Authors: Eric Hilt
Abstract: This paper analyzes the ownership and governance of the business corporations of New York State in the 1820s. Using a new dataset collected from the manuscript records of New York's 1823 capital tax, and from the charters of the corporations, I analyze the ownership structures of the firms, and investigate the degree to which ownership was separated from control at the time. In contrast to Berle and Means's account of the development of the corporation, the results indicate that many of the firms were dominated by large shareholders, who were represented on the firms' boards, and held sweeping power to utilize the firms' resources for their own benefit. The oppression of minority shareholders was a significant problem in early corporate governance, and many of the firms configured their voting rights in a way that curtailed the power of large investors. A positive relationship between firm value and these voting rights configurations is found among the publicly-traded firms in the sample.
Keywords: corporate governance; ownership; control; historical analysis; New York corporations
JEL Codes: G3; K22; M2; N21; N81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Ownership structures (G32) | Control exercised by large shareholders (G34) |
| Control exercised by large shareholders (G34) | Oppression of minority shareholders (G34) |
| Voting rights configurations (D72) | Control exercised by large shareholders (G34) |
| Voting rights configurations (D72) | Protection of minority investors (G38) |
| Voting rights configurations (D72) | Firm value (G32) |
| Managerial ownership (G34) | Firm value (G32) |