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Corporate Ownership and Control in Victorian Britain

Journal: Economic History Review

Date: 20150801

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

Abstract:
Using ownership and control data for 890 firm-years, this article examines the concentration of capital and voting rights in British companies in the second half of the nineteenth century. We find that both capital and voting rights were diffuse by modern-day standards. However, this does not necessarily mean that there was a modern-style separation of ownership from control in Victorian Britain. One major implication of our findings is that diffuse ownership was present in the UK much earlier than previously thought, and given that it occurred in an era with weak shareholder protection law, it somewhat undermines the influential law and finance hypothesis. We also find that diffuse ownership is correlated with large boards, a London head office, non-linear voting rights, and shares traded on multiple markets.

Link: Google Scholar

Background and Context

Research Scope

Study examines ownership and control data from 890 British company records between 1850-1900, focusing on how corporate ownership was structured during the Victorian era.

Historical Setting

Britain was the world's largest capital market at the time, with rapid expansion of equity markets and democratization of share ownership following the 1856 liberalization of incorporation law.

Methodology

Analysis of detailed ownership records from Companies Registration Office files, examining capital concentration, voting rights, and board structures across different industries and time periods.

Widespread Diffuse Ownership Across Victorian Industries

  • Most industries showed relatively diffuse ownership patterns rather than concentrated control
  • Banking sector had the most diffuse ownership with largest 5 investors holding only 16.1% of capital
  • Even breweries, the most concentrated sector, had relatively diffuse ownership with largest 5 investors holding 40.7%

Evolution of Ownership Concentration Over Time (1853-1902)

  • Capital concentration generally declined from 1850s to 1900s
  • Companies established in 1890s showed higher concentration than earlier periods
  • Average ownership by largest 5 investors fell from 31.4% in 1860s to 21.4% by 1900s

Comparison with Modern Ownership Structures (2013)

  • Victorian companies had more diffuse ownership than many modern stock indices
  • Average largest shareholder held 10.5% in Victorian era vs 16.0% for FTSE 100 in 2013
  • Demonstrates surprisingly modern ownership patterns in historical context

Impact of Voting Rights on Ownership Structure

  • Non-linear voting rights led to more diffuse control
  • Companies with linear voting had average insider control of 19.4% vs 10.2% for non-linear
  • Voting structures were used to protect smaller shareholders

Geographic Effects on Ownership Concentration

  • London-based companies showed more diffuse ownership
  • Multiple market listings correlated with lower ownership concentration
  • Local investor proximity had minimal impact on ownership structure

Contribution and Implications

  • Challenges conventional wisdom that dispersed ownership emerged only in the 20th century
  • Questions the law and finance hypothesis that strong shareholder protection is necessary for dispersed ownership
  • Provides new insights into the evolution of British corporate governance structures

Data Sources

  • Industry concentration data from Table 3 of the article
  • Time series analysis based on Table 7 showing capital concentration by establishment date
  • Modern comparison data from Table 5 comparing Victorian ownership to 2013 market indices
  • Voting rights analysis from Table 9 showing capital and voting concentrations
  • Geographic analysis derived from regression results in Table 10