Book contents
- Frontmatter
- Contents
- Preface
- Introduction: History and the Modern Theory of Finance
- Part I The Preindustrial World
- 1 Medieval and Renaissance Origins
- 2 Corporate Finance in the Age of Global Exploration: Trading Companies and Oceanic Discovery, 1450–1720
- 3 The Emergence of Public Markets for Investment Securities, 1688–1815
- Part II The Rise of Modern Industry
- Part III The Transition to the Contemporary Era
- Epilogue
- APPENDIX A Finance and Informational Asymmetries in the Ancient World
- APPENDIX B International Patterns of Corporate Governance
- Index
1 - Medieval and Renaissance Origins
Published online by Cambridge University Press: 22 March 2010
- Frontmatter
- Contents
- Preface
- Introduction: History and the Modern Theory of Finance
- Part I The Preindustrial World
- 1 Medieval and Renaissance Origins
- 2 Corporate Finance in the Age of Global Exploration: Trading Companies and Oceanic Discovery, 1450–1720
- 3 The Emergence of Public Markets for Investment Securities, 1688–1815
- Part II The Rise of Modern Industry
- Part III The Transition to the Contemporary Era
- Epilogue
- APPENDIX A Finance and Informational Asymmetries in the Ancient World
- APPENDIX B International Patterns of Corporate Governance
- Index
Summary
Introduction
The influences that the perennial problems of information and risk have exerted on finance have been evident since the dawn of civilization. Beginning in Mesopotamia nearly five thousand years ago, the Sumerians and their Babylonian successors perfected rudimentary contracts for rationalizing commerce, finance and private property ownership. These basic and powerful ideas eventually spread far beyond the Fertile Crescent to become key elements in an intellectual diaspora carried by trade among the peoples of the Eastern Mediterranean. Later during the Greco-Roman era new financial institutions facilitated the expansion of economic activity. Coinage, bills of exchange and new modes of public finance were broadly transmitted through the expansion of the empires of Alexander and the Caesars.
These ideas, carefully preserved by ecclesiastics during the barbarian invasions of the seventh through ninth centuries A.D., again influenced Western thinking with the economic revival of the later Middle Ages. Economic recovery together with the formation of international trading linkages between Northern and Southern Europe gave rise to and was, in turn, facilitated by an expanding financial sector. A leading center for this development was the Italian city-states, which are the central focus of this chapter. Many of the practices emergent there were basic to what we know as modern international finance, including foreign exchange conversion, bills of exchange, specialized project financing, portfolio diversification and deposit acceptance. Improvements in the legal system also facilitated economic expansion. New contractual forms and financial instruments helped to reduce risk and to enhance the efficiency of international trade and finance.
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- Information
- A History of Corporate Finance , pp. 29 - 54Publisher: Cambridge University PressPrint publication year: 1997