Revolutionary Finance? Capital Mobilization and Utilization in Pre-War Germany and Italy

Abstract

Accumulation, mobilization, and efficient utilization of capital represent serious obstacles to industrialization. Financial institutions may ease these problems by stimulating savings, matching savers and investors, and offering business or investment advice to entrepreneurs. German-style universal banks are believed by many to have played a crucial part in overcoming all three capital related stumbling blocks. Using evidence on deposit taking and branching, banks' liability structure, interlocking directorates between banks and industrial companies, and firm-level investment patterns, the paper investigates the role of German and Italian universal banks in the mobilization and efficient utilization of capital at the turn of the last century.