Betting on Hitler - the Value of Political Connections in Nazi Germany

34 Pages Posted: 24 Aug 2005

See all articles by Hans-Joachim Voth

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)

Thomas Ferguson

University of Massachusetts Boston - Department of Political Science

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

We examine the effect of close ties with the NSDAP on the stock price of listed firms in 1932-1933. We consider not only links between the National Socialists and executives, as was common in earlier work, but also with supervisory board members - whose importance is hard to overestimate in the case of German industry. One implication of our work is that, weighted by stock market capitalization in 1932, more than half of listed firms on the Berlin stock exchange had substantive links with the NSDAP. Crucially, stock market investors recognized the value of these links, sending the share prices of connected firms up as the new regime became firmly established. While the market as a whole rose after Hitler's accession to power, firms with board members known to favor the party (or backing it financially) outperformed the market by 5-10% between January and May 1933. We show that this finding is robust to a range of additional control variables and alternative estimation techniques.

Keywords: Political connections, stock market returns, market efficiency, Nazi party

JEL Classification: E60, G14, G18, N24

Suggested Citation

Voth, Hans-Joachim and Ferguson, Thomas, Betting on Hitler - the Value of Political Connections in Nazi Germany (April 2005). CEPR Discussion Paper No. 5021. Available at SSRN: https://ssrn.com/abstract=772790

Hans-Joachim Voth (Contact Author)

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Thomas Ferguson

University of Massachusetts Boston - Department of Political Science ( email )

Boston, MA 02125
United States
617-265-7173 (Fax)

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