The Shanxi Banks
25 Pages Posted: 12 Apr 2010 Last revised: 28 May 2023
There are 2 versions of this paper
Date Written: April 2010
Abstract
The remote inland province of Shanxi was late Qing dynasty China's paramount banking center. Its remoteness and China's almost complete isolation from foreign influence at the time lead historians to posit a Chinese invention of modern banking. However, Shanxi merchants ran a tea trade north into Siberia, travelled to Moscow and St. Petersburg, and may well have observed Western banking there. Nonetheless, the Shanxi banks were unique. Their dual class shares let owners vote only on insiders' retention and compensation every three or four years. Insiders shares had the same dividend plus votes in meetings advising the general manager on lending or other business decisions, and were swapped upon death or retirement for a third inheritable non-voting equity class, dead shares, with a fixed expiry date. Augmented by contracts permitting the enslavement of insiders' wives and children, and their relative's services as hostages, these governance mechanisms prevented insider fraud and propelled the banks to empire-wide dominance. Modern civil libertarians might question some of these governance innovations, but others provide lessons to modern corporations, regulators, and lawmakers.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Legal Origins and Modern Stock Markets
By Mark J. Roe
-
Culture, Law, and Corporate Governance
By Amir N. Licht, Chanan Goldschmidt, ...
-
Shareholder Protection: A Leximetric Approach
By Priya Lele and Mathias Siems
-
The Evolution of Labour Law: Calibrating and Comparing Regulatory Regimes
By Simon Deakin, Priya Lele, ...
-
By Sofie Cools
-
By Sofie Cools