When Did Ownership Separate from Control? Corporate Governance in the Early Nineteenth Century

38 Pages Posted: 27 Jun 2007 Last revised: 11 Oct 2021

See all articles by Eric Hilt

Eric Hilt

National Bureau of Economic Research (NBER); Wellesley College

Date Written: May 2007

Abstract

This paper analyzes the ownership and governance of the business corporations of New York State in the 1820s. Using a new dataset collected from the manuscript records of New York's 1823 capital tax, and from the charters of the corporations, I analyze the ownership structures of the firms, and investigate the degree to which ownership was separated from control at the time. In contrast to Berle and Means's account of the development of the corporation, the results indicate that many of the firms were dominated by large shareholders, who were represented on the firms' boards, and held sweeping power to utilize the firms' resources for their own benefit. The oppression of minority shareholders was a significant problem in early corporate governance, and many of the firms configured their voting rights in a way that curtailed the power of large investors. A positive relationship between firm value and these voting rights configurations is found among the publicly-traded firms in the sample.

Suggested Citation

Hilt, Eric, When Did Ownership Separate from Control? Corporate Governance in the Early Nineteenth Century (May 2007). NBER Working Paper No. w13093, Available at SSRN: https://ssrn.com/abstract=986943

Eric Hilt (Contact Author)

National Bureau of Economic Research (NBER)

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