Please rotate your device to landscape mode to view the charts.

Who Financed the Expansion of the Equity Market? Shareholder Clienteles in Victorian Britain

Journal: Business History

Date: 20170401

Author: Acheson, Graeme G.; Campbell, Gareth; Turner, John D.

Abstract:
Who financed the great expansion of the Victorian equity market, and what attracted them to invest? Using data on 453 firm-years and over 172,000 shareholders, we find that the largest providers of capital were rentiers, men with no formal occupation who relied on investment income. We also see a substantial growth in women investors as time progressed. In terms of clientele effects, we find that rentiers invested in large firms, whilst businessmen were the venture capitalists of young, regional enterprises. Women and the middle classes preferred safe investments, whilst financiers and institutional investors were speculators in foreign companies. Our results may help to explain the growth of new types of assets catering for particular clienteles, and the development of managerial policies on dividends and share issues.

Link: Google Scholar

Background and Context

Time Period & Scope

This study examines who invested in British companies in the five decades following the liberalization of incorporation law in the 1850s and 1860s.

Data Collection

Analysis of 453 company-years and over 172,000 shareholders from ownership records of 293 companies created between the 1850s-1902.

Research Focus

Investigation of investment patterns among different socio-occupational groups and how these changed over time during the Victorian era.

Composition of Capital Providers Shows Dominance of Rentiers

  • Rentiers (wealthy individuals with no formal occupation) were the largest providers of capital at 44.8%
  • Businessmen provided 20.2% of capital, followed by middle classes at 11% and women at 10.9%
  • Financial professionals and institutions provided relatively small proportions at 4.3% and 1.1% respectively

Growth in Women Investors and Decline in Businessmen Over Time

  • Women's capital contribution grew from 2.9% in 1850s/60s to 19.7% by 1900s
  • Businessmen's contribution declined from 38.1% to 13.1% over the same period
  • Demonstrates significant shift in investor base over the Victorian era

Investment Preferences Across Different Industries

  • Rentiers heavily invested in mining companies (77.1% of mining capital)
  • Women preferred utilities and financial firms (12.6% and 12.8% respectively)
  • Businessmen favored breweries and financial firms (19.2% and 23.5% respectively)

Risk Preferences in Share Types

  • Women invested more in preference shares (13.0%) compared to ordinary shares (9.5%)
  • Businessmen showed opposite trend with 20.8% in ordinary vs 15.3% in preference shares
  • Reflects different risk appetites among investor groups

Geographic Investment Patterns

  • Rentiers invested heavily in London-based companies (56.5% of capital)
  • Businessmen provided more capital to regional companies (27.5% in provincial-only listed firms)
  • Shows clear geographic preferences among different investor groups

Contribution and Implications

  • First comprehensive analysis of who financed the expansion of the Victorian equity market
  • Demonstrates how different investor groups had distinct preferences that influenced the development of various asset classes
  • Findings help explain the growth of preference shares and investment trusts as vehicles catering to specific investor clienteles

Data Sources

  • Capital Providers chart based on Table 3 showing occupational composition of capital and shareholders
  • Time Changes visualization derived from Table 4 showing percentage of capital contributed by decade
  • Industry Preferences chart constructed from Table 7 showing proportion of capital by industry
  • Share Types data from Table 8 comparing ordinary vs preference share ownership
  • Geographic patterns visualization based on Table 9 showing capital contribution by location