Hostname: page-component-55f67697df-2mk96 Total loading time: 0 Render date: 2025-05-15T07:21:21.722Z Has data issue: false hasContentIssue false
  • English
  • Français

The Economic Benefits of Political Connections in Late Victorian Britain

Published online by Cambridge University Press:  13 March 2013

Fabio Braggion  and
Lyndon Moore
Fabio Braggion
Affiliation:
Associate Professor, Department of Finance, Tilburg University; and Fellow, CentER, Room K 917, PO Box 90153, Warandelaan 2, 5000 LE Tilburg, The Netherlands. E-mail: f.braggion@tilburguniversity.edu
Lyndon Moore
Affiliation:
Senior Lecturer, Department of Finance, Level 12, 198 Berkeley Street, The University of Melbourne, Victoria 3010Australia. E-mail: lyndon.moore@unimelb.edu.au.
Get access Rights & Permissions [Opens in a new window]

Abstract

The late Victorian era was characterized by close links between politicians and firms in the United Kingdom, with up to half of all members of Parliament serving as company directors. We analyze 467 British companies over the period 1895 to 1904. An analysis of election results shows that the election of a new tech director is associated with a 2 percent to 2.5 percent increase in that firm's share price, whereas old tech firms were unaffected by the electoral fortunes of their directors. New technology firms with political directors were more likely to undertake seasoned issues of both equity and debt.

Type
Articles
Information
The Journal of Economic History , Volume 73 , Issue 1 , March 2013 , pp. 142 - 176
Copyright
Copyright © The Economic History Association 2013

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

Armstrong, John. “The Rise and Fall of the Company Promoter and the Financing of British Industry.” In Capitalism in a Mature Economy: Financial Institutions, Capital Exports, and British Industry, 1870–1939, edited by van Helten, J. J. and Cassis, Y., 115–39. Aldershot, UK: Edwin Elgar Publishing, 1990.Google Scholar
Arnold, Antony. “Should Historians Trust Late Nineteenth-Century Company Financial Statements?” Business History 38, no. 2 (1996): 40–54.Google Scholar
Arnold, Antony. “U.K. Accounting Disclosure Practices and Information Asymmetry During the First Quarter of the Twentieth Century: The Effect of Book Returns and Dividend Cover.” Journal of Business Finance and Accounting 25, no. 7 and 8 (1998): 775–94.Google Scholar
Bhattacharya, Sudipto. “Imperfect Information, Dividend Policy, and the ‘Bird in the Hand’ Fallacy.” Bell Journal of Economics 10, no. 1 (1979): 259–70.Google Scholar
Braggion, Fabio. “Managers and (Secret) Social Networks: The Influence of the Freemasonry on Firm Performance.” Appendix, Unpublished Manuscript, Tilburg University, 2011.Google Scholar
Braggion, Fabio, and Moore, Lyndon. “Dividend Policies in an Unregulated Market: The London Stock Exchange, 1895–1905.” Review of Financial Studies 24, no. 9 (2011): 2935–73.Google Scholar
Bunkanwanicha, Pramuan, and Wiwattanakantang, Yupana. “Big Business Owners in Politics.” Review of Financial Studies 22, no. 6 (2009): 2133–68.Google Scholar
Burhop, Carsten, Chambers, David, and Cheffins, Brian. “Is Regulation Essential to Stock Market Development? Going Public in London and Berlin, 1900–1913.” Working Paper, University of Cambridge, 2011.Google Scholar
Cain, Louis, and Patterson, Donald. “Factor Biases and Technical Change in Manufacturing: The American System, 1850–1919.” The Journal of Economic History 41, no. 2 (1981): 341–60.Google Scholar
Capie, Forrest, and Collins, Michael. “Banks, Industry, and Finance, 1880–1914.” Business History 41, no. 1 (1999): 37–62.Google Scholar
Cassis, Youssef, and Tanner, Jakob. “Finance and Financiers in Switzerland, 1880–1960” In Finance and Financiers in European History, 1880–1960, edited by Cassis, Youssef, 293–316. Cambridge: Cambridge University Press, 1992.Google Scholar
Cheffins, Brian. “Does Law Matter? The Separation of Ownership and Control in the United Kingdom.” Journal of Legal Studies 30, no. 2 (2001): 459–84.Google Scholar
Cheffins, Brian. Corporate Ownership and Control: British Business Transformed. Oxford: Oxford University Press, 2008.Google Scholar
Cingano, Federico, and Pinotti, Paolo. “Politicians at Work: The Private Returns and Social Costs of Political Connections.” Journal of the European Economic Association, forthcoming.Google Scholar
Claessens, Stijn, Feijen, Erik, and Laeven, Luc. “Political Connections and Preferential Access to Finance: The Role of Campaigns Contributions.” Journal of Financial Economics 88, no. 3 (2008): 554–80.Google Scholar
Craig, F. W. S.British Parliamentary Election Results, 1885–1918.. London: Macmillan Press, 1974.Google Scholar
Cull, Robert, Davis, Lance, Naomi Lamoreaux, and Jean-Laurent Rosenthal. “Historical Financing of Small- and Medium-Size Enterprises.” Journal of Banking and Finance 30, no. 11 (2006): 3017–42.Google Scholar
Dimson, Elroy, Marsh, Paul, and Staunton, Mike. Triumph of the Optimists: 101 Years of Global Investment Returns. Princeton, NJ: Princeton University Press, 2002.Google Scholar
Eckbo, B. Espen, Masulis, Ronald, and Norli, Øyvind. “Security Offerings.” In Handbook of Corporate Finance, edited by Espen Eckbo, B., 233–373. Amsterdam: Elsevier, 2007.CrossRefGoogle Scholar
Faccio, Mara. “Politically Connected Firms.” American Economic Review 96, no. 1 (2006a): 369–86.Google Scholar
Faccio, Mara, Masulis, Ronald, and McConnell, John. “Political Connections and Corporate Bailout.” Journal of Finance 61, no. 6 (2006): 2597–2635.Google Scholar
Ferguson, Thomas, and Voth, Hans-Joachim. “Betting on Hitler: The Value of Political Connections in Nazi Germany.” Quarterly Journal of Economics 123, no. 1 (2008): 101–37.Google Scholar
Fisman, Raymond. “Estimating the Value of Political Connections.” American Economic Review 91, no. 4 (2001): 1095–1102.Google Scholar
Fohlin, Caroline. Mobilizing Money: How the World's Richest Nations Financed Industrial Growth. Cambridge, MA: Cambridge University Press, 2012.Google Scholar
Garcke, Emile, Garcke's Manual of Electricity Undertakings, various issues.Google Scholar
Gerschenkron, Alexander. “Economic Backwardness in Historical Perspective.” In Economic Backwardness in Historical Perspective, edited by Gerschenkron, Alexander, 5–30. Cambridge, MA: Harvard University Press, 1962.Google Scholar
Goldman, Ethan, Rocholl, Jörg, and So, Jongil. “Do Politically Connected Boards Affect Firm Value?” Review of Financial Studies 22, no. 6 (2009): 2331–60.Google Scholar
Guinnane, Timothy. “Delegated Monitors, Large and Small: Germany's Banking System, 1800–1914.” Journal of Economic Literature 40, no. 1 (2002): 73–124.Google Scholar
Hannah, Leslie. The Rise of the Corporate Economy: The British Experience. Baltimore, MD: Johns Hopkins University Press, 1976.Google Scholar
Hannah, Leslie. Electricity Before Nationalization. London: The MacMillan Press, 1979.Google Scholar
Hannah, Leslie. “Pioneering Modern Corporate Governance: A View from London in 1900.” Enterprise and Society 8, no. 3 (2007): 642–86.Google Scholar
Hansard's Parliamentary Debates, various dates.Google Scholar
Harrison, A. E. “Joint Stock Company Flotation in the Cycle, Motor-Vehicle and Related Industries, 1882–1914.” Business History 23, no. 1 (1981): 165–90.Google Scholar
Hein, Leonard. “The Auditor and the British Companies Acts.” The Accounting Review 38, no. 3 (1963): 508–20.Google Scholar
Kennedy, William. Industrial Structure, Capital Markets, and the Origins of British Economic Decline. Cambridge, MA: Cambridge University Press, 1987.Google Scholar
Khwaja, Asim, and Mian, Atif. “Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market.” Quarterly Journal of Economics 120, no. 4 (2005): 1371–1411.Google Scholar
King, Anthony, ed. British Political Opinion, 1937–2000: The Gallup Polls.. London: Politico's, 2001.Google Scholar
John, Kose, and Williams, Joseph. “Dividends, Dilution, and Taxes: A Signaling Equilibrium.” Journal of Finance 40, no. 4 (1985): 1053–70.Google Scholar
Johnson, Simon, and Mitton, Todd. “Cronyism and Capital Controls: Evidence from Malaysia.” Journal of Financial Economics 67, no. 2 (2003): 351–82.Google Scholar
Larrain, Borja, and Urzua, Francisco. “Share Issuance and Cross-Sectional Returns: The Importance of Controllers’ Stakes.” Unpublished Manuscript, Pontificia Universidad Católica de Chile, 2011.Google Scholar
MacKinlay, A. Craig. “Event Studies in Economics and Finance.” Journal of Economic Literature 35, no. 1 (1997): 13–39.Google Scholar
McCartney, Sean, and Arnold, Anthony. “Financial Reporting in the Context of Crisis: Reconsidering the Impact of the ‘Mania’ on Early Railway Accounting.” The European Accounting Review 11, no. 2 (2002): 401–17.Google Scholar
McLean, R. David, Pontiff, Jeffrey, and Watanabe, Akiko. “Share Issuance and Cross-Sectional Returns: International Evidence.” Journal of Financial Economics 94, no. 1 (2009): 1–17.Google Scholar
May, Wilfred. “Financial Regulation Abroad: The Contrasts with American Technique.” Journal of Political Economy 47, no. 4 (1939): 457–96.Google Scholar
Miller, Merton, and Rock, Kevin. “Dividend Policy Under Asymmetric Information.” Journal of Finance 40, no. 4 (1985): 1031–51.Google Scholar
Mokyr, Joel. “The Second Industrial Revolution, 1870–1914.” In Storia dell'economia Mondiale, edited by Castronovo, Valerio, 219–45. Rome: Laterza Publishing, 1999.Google Scholar
Moore, Lyndon. “World Financial Markets, 1900–1925.” Unpublished Manuscript, University of Melbourne, 2012.Google Scholar
Myers, Stuart, and Majluf, Nicholas. “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have.” Journal of Financial Economics 13, no. 2 (1984): 187–221.Google Scholar
Perkin, Harold. The Rise of the Professional Society. London: Routledge, 1989.Google Scholar
Pontiff, Jeffrey, and Woodgate, Artemiza. “Share Issuance and Cross-Sectional Returns.” Journal of Finance 63, no. 2 (2008): 921–45.Google Scholar
Roberts, Brian. “A Dead Senator Tells No Lies: Seniority and the Distribution of Federal Benefits.” American Journal of Political Science 34, no. 1 (1990): 31–58.Google Scholar
Skinner, Thomas. The Stock Exchange Official Intelligence, various issues, London.Google Scholar
Sylla, Richard, and David Smith, George. “Information and Capital Market Regulation in Anglo-American Finance.” In Anglo-American Financial Systems, edited by Bordo, Michael D. and Sylla, Richard, 170–206. New York: Irwin, 1995.Google Scholar
The Economist, various dates.Google Scholar
The Times of London, various dates.Google Scholar
Francis, Thompson. English Landed Society in the Nineteenth Century. London: Routledge and Kegan Paul, 1963.Google Scholar