- The History of Corporate Finance: Development of Anglo-American Securities Markets, Financial Practices, Theories and Laws
This six-volume set contains a treasure trove of valuable documents related to the early issuance of corporate security issues in Great Britain and the United States. The period covered runs from 1677 to 1898. Also included in the set are publications that offer sensible advice to potential investors in various types of assets. Robert Wright [End Page 714] judiciously selected the entries with advisory input from Richard Sylla. Along with myself, Larry Neal, Peter Rousseau, and other financial historians, Wright and Sylla have been attempting to call greater attention to the vital role of capital markets in Great Britain, the Netherlands, and the United States in creating a favorable climate for sustained economic growth in the eighteenth and nineteenth centuries.
These six volumes offer a mixture of familiar public documents plus less familiar private publications. There are just sixteen entries, which means that little has been cut or squeezed to conserve space. In most cases we view the entire document from the opening sentence to the final word. In several cases entries run for two hundred pages or more. The organizational scheme is topical rather than chronological: Vol. 1—Development of Securities Markets; Vol. 2—Public Policy; Vol. 3—Limited Liability; Vol. 4—Corporate Finance in Practice; and Vols. 5 and 6—Corporate Finance in Theory.
Many of the private publications were unfamiliar to me, and therefore, I assume, will be fresh news to scholars not closely associated with financial history. Many economic and business historians will undoubtedly be surprised to learn how mature and sophisticated investment markets had become by the late nineteenth century. Indeed most of us, and our students as well, could profit today from listening to the sound investment advice offered in a 1852 publication entitled "A Treatise on Investments" by Robert A. Ward, an English solicitor. In separate chapters, the author covers investments in land, life insurance, joint stock companies, building societies, railroad securities, government bonds, turnpike bonds, and private mortgages. This document alone would be an eye-opener for anyone trying to gain a clearer understanding of how far financial markets had evolved by the middle of the nineteenth century.
Among the important public documents is a parliamentary commission's report on the creation of the South Sea Company in 1711. It lists the subscribers to the firm's stock and the amount invested. The South Sea Company was one of the few enterprises in Britain to acquire corporate status and thereby limited liability for stockholders in the eighteenth century. These privileges were expanded in the Limited Liability Act of 1855, the British version of U.S. general incorporation laws at the state level. No longer were the sponsors of enterprises required to gain parliamentary permission to create corporations with limited liability provisions. This entry is followed by a brief explanation of the practical functioning of the incorporation law by a knowledgeable barrister.
The majority of entries are practical guides to business leaders and investors. Non-fiction, "how-to" books and articles relating to financial [End Page 715] matters were well-established genres in both Britain and the United States in the nineteenth century. Wright has marshaled an impressive sample of this literature. In A Short Inquiry into the Profitable Nature of Our Investments, published in 1881, Robert Nash recommended a diversified portfolio of assets to modulate the downside risks in difficult times. To aid investors interested in more daring strategies, Arthur Crump published A Theory of Stock Exchange Speculation in 1874. The author suggested that knowledgeable investors could profit from what today we call "market timing." Other entries describe the basic functions of securities markets. Fortune's Epitome of Stocks & Public Funds: English, Foreign, & American, published in 1850 (first edition, 1796) provided a mountain of information on various security issues, including the history of dividend payments by the Bank of England. In section...