Finance Capitalism and Germany's Rise to Industrial Power

This book offers insights into the development of the German corporate finance system.

Caroline Fohlin (Author)

9780521396608, Cambridge University Press

Paperback, published 21 July 2011

406 pages
22.9 x 15.2 x 2.3 cm, 0.59 kg

“An impressive piece of work! Relying on extensive data collection and encompassing empirical analysis, Caroline Fohlin provides us with a new understanding of the role of banks in late-nineteenth-century Germany. The myth of relationship banking as the mainspring of Germany's rise to industrial power is thoroughly debunked – bank influence emerged after industrialization was well under way, and was much less pervasive than the myth would have it. Contrary to another one of these myths, Fohlin also shows that banks and markets need not be opposites. In pre-1913 Germany, the stock market was a source of power to banks – and flourished nonetheless. The reality of financial systems is richer than the myths.” -- Martin Hellwig, Max Planck Institute

Based on a wide array of data collected by the author, this book uses clear theoretically motivated economic analysis to explain the structure, performance, and influence of universal banks and securities markets on firms during industrialisation. The German universal banks played a significant but not overwhelming role in the ownership and control of corporate firms. Banks gained access to boards via a confluence of their underwriting and brokerage activities, the legal phenomena of bearer shares and deposited voting rights, and the flourishing securities markets of the turn of the twentieth century. In general, bank relationships had little impact on firm performance; stock market listings, or ownership structure, were more important. The findings show that securities markets can thrive within a civil-law, universal-bank system and suggest that financial system complexity can favour rapid industrial expansion.

1. Introduction
2. The development of the German corporate finance system until 1913
3. Theoretical perspectives on banking and financial system structure
4. The development and impact of universal banking
5. Corporate governance relationships: patterns and explanations
6. Firm financing and performance
7. Securities markets
8. Upheaval and recovery
9. Conclusion.

Subject Areas: Banking [KFFK], Economic history [KCZ], Economics [KC], Regional studies [GTB]