The Origination and Evolution of Ownership and Control

44 Pages Posted: 6 May 2003

See all articles by Julian R. Franks

Julian R. Franks

London Business School - Institute of Finance and Accounting; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Colin Mayer

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Stefano Rossi

Bocconi University; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: March 2003

Abstract

In the first half of the twentieth century, the UK capital markets were marked by an absence of investor protection; by the end of the century, there was more extensive protection there than virtually anywhere else in the world. The UK therefore provides an exceptional laboratory for evaluating how regulation affects the development of securities markets and corporations. We investigate this question by tracing the ownership and board composition of firms incorporated in around 1900 over the subsequent 100 years, and comparing the pattern of ownership and control with a sample incorporated around 1960. We find that at the beginning of the century there were active securities markets, firms were able to raise substantial outside equity finance, and there was rapid dispersion of ownership even in the absence of investor protection. The introduction of investor protection in the second half of the century was not associated with greater dispersion of ownership but with more trading in share blocks. We offer an explanation as to how UK capital markets could flourish in the absence of investor protection.

Keywords: Ownership, control, stock markets, investor protection

JEL Classification: G32, G34

Suggested Citation

Franks, Julian R. and Mayer, Colin and Rossi, Stefano, The Origination and Evolution of Ownership and Control (March 2003). Available at SSRN: https://ssrn.com/abstract=404720

Julian R. Franks (Contact Author)

London Business School - Institute of Finance and Accounting ( email )

Institute of Finance and Accounting
Sussex Place - Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 x3449 (Phone)
+44 20 7724 3317 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: https://ecgi.global/

Colin Mayer

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 1865 288112 (Phone)
+44 1865 288805 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Stefano Rossi

Bocconi University ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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