A Caltech Library Service

Universal banking networks in pre-war Germany: New evidence from company financial data

Fohlin, Caroline (1997) Universal banking networks in pre-war Germany: New evidence from company financial data. Research in Economics, 51 (3). pp. 201-225. ISSN 1090-9443. doi:10.1006/reec.1997.0044.

Full text is not posted in this repository. Consult Related URLs below.

Use this Persistent URL to link to this item:


Explanations for the extensive interlocking of bank and firm directorates in pre-World War I Germany have traditionally emphasized oversight and control by universal banks over their industrial clientele. The economic logic inherent in the orthodox view suggests that bank-affiliated companies should benefit from improvements in information flows as well as the good advice and guidance of bankers. Thus, attached firms would be expected to have maintained higher debt–equity ratios, profitability, and growth rates than did their independent counterparts. Using a new database of firm-level financial data to estimate discrete-choice models of the bank affiliation decision, this paper provides evidence that contradicts the standard view. The paper instead argues that externalities in the provision of underwriting and brokerage services motivated the expansive networks of interlocking directorates. The results also provide provisional evidence that proxy votes conferred on universal banks by their commercial customers played a significant role in the development of financial–industrial networks. Finally, the paper shows that, while loose connections between banks and firms were widespread, direct, exclusive relationships were rare. The findings argue for a moderate interpretation of the benefits of interlocking directorates in the later stages of German industrialization.

Item Type:Article
Related URLs:
URLURL TypeDescription
Fohlin, Caroline0000-0002-1380-2788
Additional Information:© 1997 Academic Press Limited. I am grateful to Michael Alvarez, Lance Davis, Jeff Dominitz, Barry Eichengreen, Riccardo Faini, Tim Guinnane, John James, John Latting, and Gianni Toniolo, as well as to workshop participants at Caltech and participants at the 1997 ASSA meetings and the conference on Financial Institutions and Economic Growth: the Long-Run Perspective for helpful discussions and comments on earlier drafts. I thank Hee Sup Kim and Ben Wu for excellent research assistance and the NSF grant #SBR-9617799 for financial support. Formerly SSWP 984.
Funding AgencyGrant Number
Subject Keywords:universal banking, interlocking directorates, network externalities
Issue or Number:3
Classification Code:JEL: G2, G3, N2
Record Number:CaltechAUTHORS:20171128-163454604
Persistent URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83556
Deposited By: Jacquelyn Bussone
Deposited On:29 Nov 2017 20:09
Last Modified:15 Nov 2021 20:12

Repository Staff Only: item control page