Experiments in Financial Democracy: Corporate Governance and Financial Development in Brazil, 1882-1950 (Studies in Macroeconomic History)

Half-title......Page 3
Series-title......Page 5
Title......Page 7
Copyright......Page 8
Contents......Page 11
Figures and Tables......Page 13
Preface......Page 17
Acknowledgments......Page 23
1 Introduction......Page 29
Law and Financial Development......Page 31
Argument of the Book......Page 33
Agency Costs and Investor Protections According to the Law and Finance Literature......Page 34
Challenges to the Law and Finance Literature......Page 41
The Brazilian Case: Time Present and Time Past......Page 44
Structure of the Book......Page 52
2 Financial Development in Brazil in the Nineteenth Century......Page 56
Financial Underdevelopment in Nineteenth-Century Brazil......Page 57
The Debate around Regulation of Entry......Page 60
Stock Market Growth Post-1882......Page 67
The Anatomy of a Boom: Equity Markets from 1882 to 1915......Page 68
The Republic and the First Crisis of Confidence in Stock Markets......Page 70
Trading after the 1890–1891 Reforms......Page 72
Bond Markets in Brazil......Page 73
Financial Development under Favorable Macroeconomic Conditions......Page 78
Methodology for Estimating Equity Market Capitalization......Page 81
Description of Gross Domestic Product Figures Used to Normalize the Stock Market Data......Page 83
Detailed Note on the Brazilian Currency......Page 84
Exchange Rates......Page 85
3 The Stock Exchange and the Early Industrialization of Brazil, 1882–1930......Page 86
Why not Banks?......Page 88
Finance and Development......Page 94
The Size and Importance of the Rio de Janeiro Stock Exchange......Page 98
The So Paulo Stock Exchange......Page 107
Conclusion......Page 110
4 The Foundations of Financial Democracy......Page 112
Investor Protections in Brazils Company Laws, 1882–2001......Page 114
What National Laws Matter for the Protection of Shareholders?......Page 117
Investor Protections in Company Bylaws......Page 122
Government Guarantees......Page 123
Voting Rights......Page 126
Where Did These Bylaws Come From?......Page 130
Conclusion......Page 132
5 Voting Rights, Government Guarantees, and Ownership Concentration, 1890–1950......Page 133
The Data to Study Ownership Concentration before 1950......Page 134
Voting and Concentration of Ownership and Control, 1890–1940......Page 135
Implications of the Statistical Relations between Shareholder Protections and Ownership Concentration......Page 144
Widely-held Corporations in Brazil......Page 145
Voting Caps in Other Countries......Page 148
Family-owned Corporations in Brazil......Page 151
The Aggregate Evidence on Ownership Concentration in the Long Run......Page 152
Conclusion......Page 154
6 Directors, Corporate Governance, and Executive Compensation in Brazil, c. 1909......Page 163
Boards of Directors, Incentive Structure, and Director Compensation......Page 164
Directors\' Compensation in Brazil, the United States, and England......Page 169
Implications of These Findings......Page 173
Director Compensation and Corporate Governance......Page 174
Conclusion......Page 181
7 Bond Markets and Creditor Rights in Brazil, 1850–1945......Page 183
The Scope of Corporate Bond Markets......Page 185
Measuring Creditor Rights in Brazil......Page 190
Evidence of Creditor Rights in Bankruptcy Laws......Page 193
International Influences and the Politics behind Creditor Rights......Page 194
An Exploration of Court Enforcement of Creditor Rights in Brazil, 1850–1945......Page 198
Bankruptcy Procedures and Court Enforcement of Creditor Rights in Brazil, 1850–1945......Page 199
Bankruptcy Cases in the National Archive of Brazil......Page 201
Court Enforcement of Creditor Rights......Page 203
The Sorocabana Railway Scandal......Page 206
The Long Tradition of Court Enforcement of Creditor Rights, 1850–1889......Page 207
Explaining Judges Attitudes toward Creditors......Page 209
Conclusions......Page 212
8 Were Bankers Acting as Market Makers?......Page 214
Bank-Corporate Interlocks: Theory and Evidence......Page 216
Bankers as Market Makers: The Case of the United States......Page 218
Bank Ties to Corporations in Mexico: Market Makers and Insider Lending......Page 221
Reasons to Compare Brazil with Mexico and the United States......Page 223
The Number of Connections between Banks and Corporations......Page 225
Measuring the Centrality of Banks in the Networks of Corporate Interlocks......Page 230
Multivariate Analysis of Bank Connections in Mexico and Brazil......Page 237
Conclusion......Page 241
Explanations of the Reversal in Financial Development after World War I......Page 243
Beginning of the End: The Decline of Capital Flows after 1915......Page 246
Inflation, Investor Returns, and Financial Development after World War I......Page 252
The 1945 Bankruptcy Law and Decline of Creditor Rights......Page 257
The Decline of Shareholder Protections......Page 259
Preferred Shares and the Decline of Shareholder Rights......Page 261
Conclusion......Page 262
10 The Rise of Concentrated Ownership in the Twentieth Century......Page 264
Inflation and the \"Reversal\" in Corporate Finance: Government Banks versus Markets......Page 265
The Rise of Concentrated Ownership......Page 268
Family Ownership and the Rise of Business Groups......Page 270
Investor Protections and Government Control......Page 276
Conclusion......Page 279
Companies Are Not Bound by the Legal Environment in which They Operate......Page 281
Voting Rights Matter......Page 282
Disclosure Matters......Page 284
The Limits to Corporate Bylaws......Page 285
Different Corporate Governance Practices Lead Firms to Select Different Financial Structures......Page 286
No Signs of Persistent Effects of Brazils Legal Institutions......Page 287
Politics Matter......Page 289
Might a \"Great Reversal\" Such as That Experienced after World War I Occur Again?......Page 290
Brazil’s National Archive, Rio de Janeiro......Page 295
Company Documents Available at the São Paulo State Archive, São Paulo......Page 297
Other Primary Documents and Data Sources......Page 299
Secondary Sources......Page 300
Index......Page 317