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Investment BankingInstitutions, Politics, and Law$
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Alan D. Morrison and William J. Wilhelm, Jr.

Print publication date: 2007

Print ISBN-13: 9780199296576

Published to Oxford Scholarship Online: May 2007

DOI: 10.1093/acprof:oso/9780199296576.001.0001

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Investment Banking Origins

Investment Banking Origins

Chapter:
(p.97) 4 Investment Banking Origins
Source:
Investment Banking
Author(s):

Alan D. Morrison (Contributor Webpage)

William J. Wilhelm Jr.

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199296576.003.0004

This chapter traces the origins of the modern investment bank. It argues that the English Revolution of 1688 created the strong formal property rights upon which large-scale trade rests. Nevertheless, mercantile law had not advanced to a stage where it could support complex trade, and trans-Atlantic communication was so slow that participants in the Atlantic trade required so much autonomy that formal contracting over their actions was a technological impossibility. Hence the Atlantic trade of the 18th century rested upon reputationally intermediated relational contracts of the type that characterize the modern investment bank. The chapter surveys evidence in support of this hypothesis and discusses the 18th-century development of the stock market in the UK.

Keywords:   Atlantic trade, investment bank, mercantile law, stock market, mercantile trade, English Revolution

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