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Colinmayer
Colinmayer
Colinmayer
Porsche AG
Porsche/Piech Family Voting Pool
100% 10%
Porsche AG Non-Voting
th 20
Century
Minority investor protection was exceptionally weak after Foss v Harbottle At the beginning of the century UK markets were largely unregulated The law and finance literature would therefore predict small capital markets and concentrated ownership Is this the case?
The Companies
All companies incorporated or reincorporated over the period 1897 to 1903 that are still in existence today (20 companies) All companies that died and for which data have been retained by companies house (5 companies)
The Data
Individual firm data on insider/outsider ownership Names of shareholders and their holdings (outside > 1%) from share registers Equity issuance - rights issues, private placements Acquisitions - dates and shares issued Boards - names of directors and their shareholdings
Analysis
Evolution over 10 years at 10 year intervals Compute insider/outsider, family ownership Contribution to growth and ownership changes of rights issues, placings, IPOs and acquisitions Board representation, chairmanship of families Compute measures of dispersion, mutation and separation of family ownership/control
Merger Waves
Evolution of Ownership
All Shareholders Directors Outsiders
mean
1900 1910 1920 1930 1.88 8.40 11.16 17.72
median
1.00 1.00 2.00 4.00
mean
1.88 3.40 2.00 2.14
frequcy
25 20 18 14
mean
14.33 24.67 28.80 35.89
frequcy
9 12 15 18
obs
25 25 25 25
1940
1950 1960 1970 1980 1990
17.92
24.88 25.87 51.95 57.86 45.76
7.00
9.00 12.00 11.00 8.00 4.00
2.30
3.67 4.43 3.00 1.80 2.00
10
9 7 8 5 2
25.00
30.75 31.65 57.57 61.24 48.33
18
20 20 21 21 21
25
24 23 22 21 21
2000
mean
48.45
26.98
3.00
1.67
2.59
53.58
36.42
19
20
1900-1950 1950-2000
Example - GKN
Guest Keen and Company founded in 1900 to take over two iron and steel companies Acquired Nettlefold in 1902 by issuing 315,000 ordinary shares to form GKN In 1920 quoted on Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Liverpool, Manchester and Sheffield exchanges
1990
2000 mean
10.10
3.85 8.40
4.50
3.00
1.50
1.17 1.38
8
5
10.90
5.25 12.33
20
20
20
20
Mean 1960 1970 1980 1990 2000 Mean 52.17 27.83 16.69 6.32 4.44 21.49
n. obs 25 25 22 22 20
Dispersion of Ownership
Mean: 3.80% (All shareholders) 1900 vs. 1960 t-tests of differences in means
First decade All shareholders Directors Outsiders 0.82 1.89c 4.94a Second decade 2.06b 0.71 0.34 Third decade 0.40 1.15 0.20 Fourth decade 1.60 0.14 0.78 Overall 0.21 1.19 2.87a
Mutation of Ownership
Mean: 40.01% (All shareholders) 1900 vs. 1960 t-tests of differences in means
First decade All shareholders Directors Outsiders Directors (board) 1.08 2.25b 3.38a 2.47b Second decade 2.23b 2.30b 2.60b 1.92c Third decade 3.09a 3.54a 3.14a 1.96c Fourth decade 2.72a 1.71c 2.45b 0.83 Overall 4.40a 4.41a 6.05a 3.59a
Provincial Exchanges
The number of commercial and industrial companies quoted in the Manchester list increased from seventy in 1885 to nearly 220 in 1906. Most of these were small companies with capitals ranging from 50,000 to 200,000 (Thomas) By the mid 1880s Sheffield, along with Oldham, was one of the two most important centres of joint stock in the country, with 44 companies, with a paid up capital of 12 million (Thomas)
Monitoring by Trust
Ownership was dispersed, but geographically concentrated Provincial stock markets accessed local investors: Lavington (1921): Local knowledge on the part of the investor of the vendor and his undertaking would ensure fair prices. The securities are rarely sold by means of a prospectus they are placed among local people.
Conclusions of Paper:1
No support for investor protection thesis: Dispersed ownership, large capital markets and merger waves in absence of investor protection Evolution of ownership and control did not alter with substantial changes in regulation in middle of the century
Conclusions: 2
Trust and local implicit contracts facilitated ownership dispersion Firms grew rapidly by issuing equity But geographical dispersion undermined relations based on trust Formal investor protection was the response Associated with greater liquidity and trading Is takeover activity primary cause of crosscountry differences in evolution?