The Telegraph and Modern Banking Development, 1881-1936
73 Pages Posted: 19 Nov 2019 Last revised: 16 Dec 2019
Date Written: November 8, 2019
The telegraph was introduced to China in the late 19th century, a time when China also saw the rise of modern banks. This unique historical context allows us to examine the role of information technology in banking development. We find that the presence of a telegraph significantly increased the number of banks. This effect becomes greater when we instrument the distribution of telegraph stations using the shortest distance to the military telegraph trunk built before the emergence of modern banks (1897). By increasing inter-regional information flow, the telegraph enabled banks to expand their branches to distant areas.
Keywords: Information technology; telegraph; bank; finance; modern China
JEL Classification: G21, G14, O14, N75
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