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Financial Elites and European BankingHistorical Perspectives$
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Youssef Cassis and Giuseppe Telesca

Print publication date: 2018

Print ISBN-13: 9780198782797

Published to Oxford Scholarship Online: September 2018

DOI: 10.1093/oso/9780198782797.001.0001

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Trust and Regulation in Corporate Capital Markets before 1914

Trust and Regulation in Corporate Capital Markets before 1914

Chapter:
(p.134) 6 Trust and Regulation in Corporate Capital Markets before 1914
Source:
Financial Elites and European Banking
Author(s):

Leslie Hannah

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198782797.003.0007

Historians have struggled to explain how stock markets could develop—with notable vigour in many countries before 1914—before modern shareholder protections were legally mandated. Trust networks among local elites—and/or information signalling to public investors—substituted for legal regulation, but this chapter suggests real limits to such processes. They are especially implausible when applied to giant companies with ownership substantially divorced from control, of which there were many with—nationally and internationally—dispersed shareholdings. In London—the largest pre-1914 securities market—strong supplementary supports for market development were provided by mandatory requirements for transparency and anti-director rights in UK statutory companies and by low new issue fees. There were also stringent London Stock Exchange requirements for other companies wanting the liquidity benefits of official listing. Shareholder rights were similarly achieved in Brazil and other countries and colonies dependent on British capital.

Keywords:   corporate governance, investment banks, stockbrokers, stock exchanges, trust

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