Villains or Heroes? Private Banks and Railroads after the Sherman Act

Miguel Cantillo Simon (miguel.cantillo@ucr.ac.cr)
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Miguel Cantillo Simon: Universidad de Costa Rica

No 201701, Working Papers from Universidad de Costa Rica

Abstract: This paper analyzes and measures the value that American private banks added as directors of non financial companies. Using data between 1874 and 1913, and an event study from 1906, I find that bank directors added about 20% of a firm’s market capitalization. Collusive practices encouraged by private banks accounted for 65% of this value, and were the equivalent of creating a three player market among railroads. About 35% of the value added by banks came from better governance. I argue that although policymakers were partly right in sidelining private banks as activist investors, this helped entrench managers.

Keywords: Antitrust; Collusion; Corporate Governance; Financial History (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017-01, Revised 2017-01
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Persistent link: https://EconPapers.repec.org/RePEc:fcr:wpaper:201701

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