Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-22T06:12:08.113Z Has data issue: false hasContentIssue false
  • English
  • Français

Does Civil Law Tradition and Universal Banking Crowd out Securities Markets? Pre-World War I Germany as Counter-Example

Published online by Cambridge University Press:  18 February 2015

Caroline Fohlin
Get access Rights & Permissions [Opens in a new window]

Abstract

This article poses three main questions: Does the civil-law tradition favor large, concentrated, universal banking systems? Does this sort of legal system work against the development of active securities markets? Do powerful universal banks (whether or not legal tradition lies at the root of bank power) replace securities markets or prevent them from operating efficiently? Based on evidence from Pre-World War I Germany, this paper argues that the answer to all three questions is “no.”

Type
Articles
Information
Enterprise & Society , Volume 8 , Issue 3 , September 2007 , pp. 602 - 641
Copyright
Copyright © The Author(s) 2007. Published by Cambridge University Press on behalf of the Business History Conference. All rights reserved.

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.)

References

Bibliography of Works Cited

Books

Allen, Franklin and Gale, Douglas. Comparing Financial Systems. Cambridge, Mass., 2000.Google Scholar
Berghahn, Volker R. Germany and the Approach of War in 1914. New York, 1973.Google Scholar
Knut, Borchardt, and Meyer-Stoll, Cornelia Max Weber Börsenwesen: Schriften und Reden, 1893–1898. Tübingen, 1999.Google Scholar
Bund der, Landwirte. Das neue Börsengesetz. Berlin, 1908.Google Scholar
Burhop, Carsten. Die Kreditbanken in der Gründerzeit. Wiesbaden, 2004.Google Scholar
Buss, Georg. Die Berliner Börse von 1685–1913. Berlin, 1913.Google Scholar
Dietl, Helmut. Capital Markets and Corporate Governance in Japan, Germany, and the United States: Organizational Responses to Market Inefficiencies. New York, 1998.Google Scholar
Dietl, Helmut. Capital Markets and Corporate Governance in Japan, Germany, and the United States: Organizational Responses to Market Inefficiencies. New York, 1998.Google Scholar
Eube, Steffen. Der Aktienmarkt in Deutschland vor dem Ersten Weltkrieg–eine Indexanalyse. Frankfurt, 1998.Google Scholar
Evans, George Heberton Jr. Business Incorporations in the United States, 1800–1943. New York, 1948.Google Scholar
Fohlin, Caroline. Finance Capitalism and Germany’s Rise to Industrial Power. New York, 2007.Google Scholar
Fohlin, Caroline. Financial System Design and Industrial Development: International Patterns in Historical Perspective. New York, 2007.Google Scholar
Gerschenkron, Alexander. Bread and Democracy in Germany. 1943; Ithaca, N.Y., 1989.Google Scholar
Herrigel, Gary. Industrial Constructions: The Sources of German Industrial Power. London, 1996.Google Scholar
Hommelhoff, Peter. Hundert Jahre modernenes Aktienrecht. Berlin, 1985.Google Scholar
Kohn, David. Der Getreideterminhandel. Leipzig, 1891.Google Scholar
Krahnen, Jan-Peter, and Schmidt, Reinhard eds. German Financial System, Oxford, U.K., 2004.Google Scholar
Liefmann, Robert. Beteiligungs- und Finanzierungsgesellschaften: Eine Studie über den Modernen Effekten-Kapitalismus in Deutschland, den Vereinigten Staaten, der Schweiz, England, Frankreich und Belgien. Jena, 1921.Google Scholar
Meier, Johann Christian. Die Entstehung des Börsengesetzes vom 22. Juni 1896. Munich, 1993.Google Scholar
Milhaupt, Curtis J., and Pistor, Katharina eds. Law and Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development around the World. Chicago, 2008.Google Scholar
Morck, Randall, ed. The History of Corporate Governance Around the World: Family Business Groups to Professional Managers. Chicago, 2005.Google Scholar
Nelson, Peach, W. The Security Affiliates of National Banks. Baltimore, Md., 1941.Google Scholar
Pohl, Manfred. Konzentration im Deutschen Bankwesen, 848–1980. Frankfurt, 1982.Google Scholar
Prion, Willi. Die Preisbildung an der Wertpapierbörse. 1910; Leipzig, 1929.Google Scholar
Riesser, Jakob. Die Deutschen Groβbanken und ihre Konzentration. Jena, 1910. [English translation: The German Great Banks and Their Concentration. Washington, D.C., 1911.]Google Scholar
Schulz, Wolfgang. Das deutsche Börsengesetz. Die Entstehungsgeschichte und Wirtschaftlichen Auswirkungen des Börsengesetzes von 1896. Frankfurt, 1994.Google Scholar
Taeuber, Rudolf. Die Börsen der Welt. Berlin, 1911.Google Scholar
Verdier, Daniel. Moving Money: Banking and Finance in the Industrialized World. New York, 2002.Google Scholar
Weber, Adolf. Depositenbanken und Spekulationsbanken. Leipzig, 1915.Google Scholar
Weber, Hans Ulrich. Deutsche Gesellschaftsgeschichte. Munich, 1987.Google Scholar
Weigt, Anja. Der deutsche Kapitalmarkt vor dem Ersten Weltkrieg–Gründerboom, Gru¨ nderkrise und Effizienz des Deutschen Aktienmarktes bis 1914. Frankfurt, 2005.Google Scholar
Wellhöner, Volker. Groβbanken und Groβindustrie im Kaiserreich. Göttingen, 1989.Google Scholar
Barrett, Whale, P. Joint-Stock Banking in Germany. London, 1930.Google Scholar
Wiener, Fritz A. Die Börse. Berlin, 1905.Google Scholar
Wormser, Otto. Die Frankfurter Börse. Tübingen, 1919.Google Scholar

Articles and Essays

Marco, Becht, and DeLong, J. Bradford Why Has There Been So Little Blockholding in America. In A History of Corporate Governance Around the World: Family Business Groups to Professional Managers, ed. Morck, Randall3Chicago, 2005, pp. 613–66.Google Scholar
Borchardt, Knut. “Max Weber’s Writings on the Bourse: Puzzling out a Forgotten Corpus.” Max Weber Studien 2, no. 2 (2002): 139–62.Google Scholar
Bunzel, Julius. “Der Terminhandel, seine Volkswirtschaftliche Bedeutung und Reform.” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung (1897): 385.Google Scholar
Bunzel, Julius. “Der Terminhandel, seine Volkswirtschaftliche Bedeutung und Reform.” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung (1897): 385.Google Scholar
Capie, F., and Rodrik-Bali, G. “Concentration in British Banking, 1870–1920.” Business History 24 (Nov. 1982): 280–92.Google Scholar
Carney, William J. “Large Bank Stockholders in Germany: Saviors or Substitutes ?.” Journal of Applied Corporate Finance 9 (Winter 1897): 74–82.Google Scholar
Coffee, John C. “The Rise of Dispersed Ownership: The Roles of Law and the State in the Separation of Ownership and Control.” Yale Law Journal 111 (Oct. 2001): 1–82.Google Scholar
Deeg, Richard, and Jackson, Gregory “Towards a More Dynamic Theory of Capitalist Variety.” Socio-Economic Review 5 (Jan. 2007): 149–79.Google Scholar
Eley, Geoff. “The British Model and the German Road: Rethinking the Course of German History Before 1914.” In The Peculiarities of German History ed. David, Blackbourn and Eley, Geoff New York, 1984, pp.75–90.Google Scholar
Emery, Henry Crosby “The Results of the German Exchange Act of 1896.” Political Science Quarterly 13 (June 1898): 286–320.Google Scholar
Fama, Eugene F., and French, Kenneth R. “Common Risk Factors in the Returns on Stocks and Bonds.” Journal of Financial Economics 33 (Feb. 1993): 3–56.Google Scholar
Fama, Eugene F., and MacBeth, J. “Risk, Return and Equilibrium: Empirical Tests.” Journal of Political Economy 81 (May-June 1973): 607–36.Google Scholar
Fear, Jeffrey, and Kobrak, Christopher “Diverging Paths: Accounting for Corporate Governance in America and Germany.” Business History Review 80 (Spring 2006): 1–48.Google Scholar
Fohlin, Caroline “Corporate Capital Structure and the Influence of Universal Banks in Pre-World War I Germany.” Jahrbuch für Wirtschaftsgeschichte 2 (2002): 113–34.Google Scholar
Fohlin, Caroline “The History of Corporate Ownership and Control in Germany.” In A History of Corporate Governance Around the World: Family Business Groups to Professional Managers ed. Morck, R. Chicago, 2005, 223–77.Google Scholar
Fohlin, Caroline “Regulation, Taxation, and the Development of the German Universal Banking System.” European Review of Economic History 6 (Aug. 2002): 221–54.Google Scholar
Fohlin, Caroline “The Rise of Interlocking Directorates in Imperial Germany.” Economic History Review 52 (May 1999): 307–33.Google Scholar
Gehrig, Thomas, and Fohlin, Caroline “Trading Costs in Early Securities Markets: The Case of the Berlin Stock Exchange 1880–1910.” Review of Finance 10 (Dec. 2006): 587–612.Google Scholar
Gömmel, Rainer “Entstehung und Entwicklung der Effektenbörse im 19. Jahrhundert bis 1914.” In Deutsche Börsengeschichte ed. Pohl, H. Frankfurt, 1992, pp.135–207.Google Scholar
Gorton, Gary, and Schmid, Frank A. “Universal Banking and the Performance of German Firms.” Journal of Financial Economics 58 nos. 1–2 (2000): 29–80.Google Scholar
Horn, Norbert. “Aktienrechtliche Unternehmensorganisation in der Hochindustrialisierung (1860–1920): Deutschland, England, Frankreich und die USA im Vergleich.” In Recht und Entwicking der Groβunternehmen im 19. und Frühen 20. Jahrhundert ed. Horn, N. and Kocka, J. Göttingen, 1979.Google Scholar
Kantorowicz, M. “Die Wirksamkeit der Spekulation im Berliner Kornhandel, 1850–1890.” Jahrbuch für Gesetzgebung und Verwaltung 3 (1891): 221.Google Scholar
Kennedy, William P. “TPortfolio Behavior and Economic Development in Late Nineteenth-Century Great Britain and Germany: Hypotheses and Conjectures.” Research in Economic History 6 (1991): 93–130.Google Scholar
Kreuzer, Markus “Parliamentarization and the Question of GermanExceptionalism: 1867–1918.” Central European History 36 (2003): 327–57.Google Scholar
Kroszner, Randall S. and Rajan, Raghuram G. “Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking Before 1933.” American Economic Review 84 (Sept. 1994): 810–32.Google Scholar
La Porta, Rafael, Florencio, Lopez-de-Silanes, Andrei, Shleifer and Vishny, Robert W. “Law and Finance.” Journal of Political Economy 106 (Dec. 1998): 1113–55.Google Scholar
Lestition, Steven Historical preface to Max Weber, “Stock and Commodity Exchanges.” Theory and Society 29 (June 2000): 289–304.Google Scholar
Levine, Ross. “Bank-Based or Market-Based Financial Systems: Which is Better?.” Journal of Financial Intermediation 11 (Oct. 2002): 398–428.Google Scholar
Loeb, Ernst. “The German Exchange Act of 1896.” Quarterly Journal of Economics 11 (July 1897): 388–428.Google Scholar
Malkiel, Burton. “The Efficient Market Hypothesis and its Critics.” Journal of Economic Perspectives 17 (Winter 2003): 59–82.Google Scholar
Michie, Ranald. “Different in Name Only? The London Stock Exchange and Foreign Bourses, c. 1850–1914.” Business History 30 (Jan. 1988): 46–68.Google Scholar
Oyefeso, O. “Literature Survey of Measurement of Risk: The Value Premium.” Journal of Asset Management 5 (Dec. 2004): 277–88.Google Scholar
Papayoanou, Paul A. “Interdependence, Institutions, and the Balance of Power: Britain, Germany, and World War I.” International Security 20 (Spring 1996): 42–76.Google Scholar
Perold, André. “The Capital Asset Pricing Model.” Journal of Economic Perspectives 18 (Summer 2004): 3–24.Google Scholar
Rajan, Raghuram G. and Zingales, Luigi “The Great Reversals: The Politics of Financial Development in the Twentieth Century.” Journal of Financial Economics 69 (July 2003): 5–50.Google Scholar
Rich, Georg and Walter, Christian “The Future of Universal Banking.” Cato Journal 13 (Fall 1993): 289–313.Google Scholar
Roe, Mark. “Some Differences in Corporate Structure in Germany, Japan, and the United States.” Yale Law Journal 102 (June 1993): 1927–2003.Google Scholar
Roth, Guenther. “Max Weber: Family History, Economic Policy, Exchange Reform.” International Journal of Politics, Culture, and Society 15 (March 2002): 509–20.Google Scholar
Ruesch, Hermann. “Der Berliner Getreidhandel unter dem deutschen Börsengesetz.” Jahrbücher für National-Ökonomie 33 (1907): 145.Google Scholar
Schmidt, Reinhard, Tyrell, Marcel “What Constitutes a Financial System in General and the German Financial System in Particular?.” In German Financial System, ed. Jan-Peter, Krahnen and Schmidt, Reinhard Oxford, U.K., 2004 pp.19–69.Google Scholar
Schonhardt-Bailey, Cheryl. “Parties and Interests in the ‘Marriage of Iron and Rye.’” IBritish Journal of Political Science 28 (April 1998): 291–330.Google Scholar
William, Schwert, G. “Anomalies and Market Efficiency.” In Handbook of the Economics of Finance, ed. George, Constantinides, Harris, Milton and Stulz, René New York, 2003 pp.937–72.Google Scholar
Simon, Miguel Cantillo. “The Rise and Fall of Bank Control in the United States: 1890–1939.” American Economic Review 88 (Dec. 1998): 1077–93.Google Scholar
Smiley, Gene. “The Expansion of the New York Securities Market at the Turn of the Century.” Business History Review 55 (Spring 1981): 75–85.Google Scholar
Swedberg, Richard. “The Changing Picture of Max Weber’s Sociology.” Annual Review of Sociology 29 (Aug. 2003): 283–306.Google Scholar
Sylla, Richard. “Schumpeter Redux: A Review of Raghuram G. Rajan and Luigi Zingales’s Saving Capitalism from the Capitalists.” Journal of Economic Literature 44 (June 2006): 391–404.Google Scholar
Tilly, Richard. “Public Policy, Capital Markets and the Supply of Industrial Finance in Nineteenth-Century Germany.” In The State, the Financial System, and Economic Modernization, ed. Sylla, Richard, Tilly, Richard and Tortella, Gabriel New York, 1999 pp.134–57.Google Scholar
Vaubel, Roland. “Federation with Majority Decisions: Economic Lessons from the History of the United States, Germany and the European Union.” Economic Affairs 24 (Dec. 2004): 53–59.Google Scholar
Weber, Max. “Commerce on the Stock and Commodity Exchanges [Die Börsenverkehr (1896)].” Theory and Society 29 (June 2000): 339–71.Google Scholar
Weber, Max. “Stock and Commodity Exchanges [Die Börse (1894)].” Theory and Society 29 (June 2000): 305–38.Google Scholar

Unpublished Works and Online Sources

Becht, Marco, and Bradford DeLong, J. “‘Excess Volatility’ in the German Stock Market, 1876–1990.” NBER Working Paper no. W4054. April 1992.Google Scholar
Bossaerts, Peter, and Fohlin, Caroline “Has the Cross-Section of Average ReturnsAlways Been the Same? Evidence from Germany, 1881–1913.” California Institute of Technology, Social Science Working Paper no. 1084. July 2000.Google Scholar
Burhop, Carsten. “Financial Development and Corporate Law: Historical Evidence from the German IPO market, 1870–1896.” University of Müunster, Working Paper. Aug. 2006.Google Scholar
Fohlin, Caroline. “Banking Industry Structure, Competition, and Performance: Does Universality Matter.” California Institute of Technology, Social Science Working Paper no. 1078. Oct. 2000.Google Scholar
Fohlin, Caroline. “Economic, Political, and Legal Factors in Financial System Development: International Patterns in Historical Perspective.” California Institute of Technology, Social Science Working Paper no. 1089. May 2000.Google Scholar
Fohlin, Caroline. and Reinhold, Steffen “How Anomalous are the Anomalies in Common Stock Returns? Fresh Evidence from Pre-World War I Germany.” Johns Hopkins University, Working Paper. May 2007.Google Scholar
Fohlin, Caroline. Tobias, Brüunner and Gehrig, Thomas “Asymmetric Information and the Costs of Trading in the New York Stock Exchange, 1900–1910.” Johns Hopkins University, Working Paper. May 2007.Google Scholar
Franks, Julian R., Colin, Mayer and Rossi, Stefano “Ownership: Evolution and Regulation.” European Corporate Governance Institute–Finance, Working Paper no. 09/2003. March 2005.Google Scholar
Korolenko, Margaryta, and Baten, Joerg “War, Crisis, and the Capital Market: The Anomaly of the Size Effect in Germany, 1872–1990.” University of Tübingen, Working Paper. Aug. 2006.Google Scholar
Osterbach, Zoltan, Sergey, Gelman, and Burhop, Carsten “Taxation, Regulation, and the Information Efficiency of the Berlin Stock Exchange, 1892–1913.” University of Münster, Working Paper. May 2006.Google Scholar
Papayoanou, Paul A., and Kastner, Scott L. http://igcc.ucsd.edu/pdf/policypapers/pp40.pdf Accessed on July 24, 2007.Google Scholar
Pierdzioch, Christian “Feedback Trading and Predictability of Stock Returns in Germany, 1880–1913.” Kiel Working Paper no. 1213. May 2004.Google Scholar
Schlag, Christian, and Wodrich, Anja “Has There Always Been Underpricing and Long Run Underperformance?—IPOs in Germany Before World War I.” Center for Financial Studies, Working Paper no. 2000/12. Nov. 2000.Google Scholar
Tilly, Richard. “The Berlin Securities Exchange in National Context: Actors, Rules and Reforms to 1914.” University of Münster, Working Paper. Jan. 1995.Google Scholar
Windolf, Paul. “The Emergence of Corporate Networks in the United States and Germany 1896–1938.” Paper presented to the American Sociological Association Meeting, Philadelphia, Aug. 2005.Google Scholar