Corporate Governance and the Development of Manufacturing Enterprises in Nineteenth-Century Massachusetts

Eric Hilt

Chapter in NBER book Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective (2015), William J. Collins and Robert A. Margo, editors (p. 73 - 102)
Conference held December 14, 2013
Published in September 2015 by University of Chicago Press
© 2015 by the National Bureau of Economic Research

This paper analyzes the use of the corporate form among nineteenth century manufacturing firms in Massachusetts, from newly collected data from 1875. An analysis of incorporation rates across industries reveals that corporations were formed at higher rates among industries in which firm size was larger. But conditional on firm size, the industries in which production was conducted in factories, rather than artisanal shops, saw more frequent use of the corporate form. On average, the ownership of the corporations was quite concentrated, with the directors holding 45 percent of the shares. However, the corporations whose shares were quoted on the Boston Stock Exchange were ‘widely held’ at rates comparable to modern American public companies. The production methods utilized in in different industries also influenced firms’ ownership structures. In many early factories, steam power was combined with unskilled labor, and managers likely performed a complex supervisory role that was critical to the success of the firm. Consistent with the notion that monitoring management was especially important among such firms, corporations in industries that made greater use of steam power and unskilled labor had more concentrated ownership, higher levels of managerial ownership, and smaller boards of directors.

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This paper was revised on September 24, 2014

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This chapter first appeared as NBER working paper w20096, Corporate Governance and the Development of Manufacturing Enterprises in Nineteenth-Century Massachusetts, Eric Hilt
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