The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866-1897

Peter Rousseau

No 15770, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The rapid growth of deposits in New York City over the three decades following the Civil War is often attributed to the release of pent-up demand for the services that transactions accounts could provide. I advance a complementary explanation that centers on the existence of an increasingly efficient market for bank shares. The stock market was important because it generated price and dividend quotations that signaled depositors about the soundness of individual banks, thereby directing the expansion. At the same time, innovations within the city's banks created conditions under which stock prices became more informative, reducing asymmetries between banks and depositors to a point where confidence in banks could grow. Using a new database of stock prices, dividends, and balance sheet items for traded New York City banks from 1866 to 1897, a series of dynamic panel data models supports the proposed mechanism.

JEL-codes: E44 N11 N21 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-his and nep-mac
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Published as Rousseau, Peter L., 2011. "The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866–1897," The Journal of Economic History, Cambridge University Press, vol. 71(04), pages 976-1005, December.

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