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Bank Securities Holdings and Industrial Finance Before World War I: Britain and Germany Compared

Fohlin, Caroline (1997) Bank Securities Holdings and Industrial Finance Before World War I: Britain and Germany Compared. Social Science Working Paper, 1007. California Institute of Technology , Pasadena, CA. (Unpublished)

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Orthodox paradigms hold that through direct involvement with firms, the German universal banks funneled substantial amounts of financial capital into industry during the half century before World War I. At the same time, by avoiding such engagement with industrial companies, British banks are thought to have disadvantaged that country's economy with respect to its continental and American competitors. Using balance sheet data for the British deposit banks and the German universal banks, this paper shows that the German and British banks held approximately the same proportion of their assets in the form of non-government securities. In addition, the paper uses details garnered from two of the largest German banks to demonstrate that the universal banks became directly involved in only a few companies, that the total of these equity holdings amounted to a small share of bank assets, and that often the shares remained on the banks' books only because of an insufficient market for new issues. Thus, the idea that the German universal banks purposely took long-term stakes in industrial companies in order to credibly commit to behaving in the long-run interest of the firms finds limited support from this analysis.

Item Type:Report or Paper (Working Paper)
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URLURL TypeDescription ItemPublished Version
Fohlin, Caroline0000-0002-1380-2788
Additional Information:I am grateful to Lance Davis for helpful comments and discussions. This research was funded by the NSF. Published as Fohlin, C. (1997). Bank securities holdings and industrial finance before World War I: Britain and Germany compared. Business and Economic History, 463-475.
Group:Social Science Working Papers
Funding AgencyGrant Number
Subject Keywords:Bank assets, Universal banks, Investment banking, Financial securities, Financial investments, Securities industry, Banks, Commercial banks, Bank stocks, Government securities
Series Name:Social Science Working Paper
Issue or Number:1007
Record Number:CaltechAUTHORS:20170814-153221064
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80383
Deposited By: Jacquelyn Bussone
Deposited On:15 Aug 2017 16:31
Last Modified:03 Oct 2019 18:30

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