Managers, Firms and (Secret) Social Networks: The Economics of Freemasonry

This paper studies the relationships between managers a¢ liations with Freema- sonry and companies' performance. Using a unique data set of 410 companies quoted on the London Stock Exchange between 1895 and 1902, I find that Masonic managers were associated with greater access to credit in small and young companies whose se- curities where traded over the counter. These companies earned higher profits, but the effect is not statistically significant. On the other hand, large publicly quoted corpora- tions that were managed by Freemasons did not obtain greater access to credit; they had lower profiys and lower Tobin's Q. These findings help to understand how social networks are related to companies' performances. Although social networks help to resolve agency problems between lenders and borrowers in firms that have difficulties in obtaining debt finance, in larger publicly quoted companies they are associated with worse agency conflicts between managers and shareholders and with worse economic performance.Freemasons;Social Networks;Access to Credit

The Economic Benefits of Political Connections in Late Victorian Britain

The late-Victorian era was characteristed by especially close links between politicians and firms in the UK. Roughly half of all members of Parliament served as company directors, many as directors of multiple firms. We analyze 467 British companies over the period 1895 to 1904 to investigate the interaction of firms and politicians. We find that new-technology firms with politicians serving on their boards were more likely to issue equity finance and had higher Tobin's Q. Our evidence suggests that causality runs from director-politicians to a firm's performance, rather than in the opposite direction.Political Connections;Second Industrial Revolution;External Finance

Dividend Policies in an Unregulated Market: The London Stock Exchange 1895-1905

We examine the e¤ects of dividend policies on 469 British firms between 1895 and 1905. These firms operated in an environment of very low taxation and an absence of institutional constraints. We find strong support for asymmetric information/signaling theories of dividend policy, and little support for agency models. Our results suggest that dividends can signal information from managers to shareholders, even if dividend payments incur only very low taxes. However, taxes appear to be necessary to allow dividend policies to resolve agency problems between managers and investors.Dividend Policy;London Stock Exchange

How Insiders Traded before Rules

Abstract: U.K. company insiders, such as directors, were legally allowed to trade in the shares of their own companies up until the Companies Act of 1980. We investigate the trading behaviour of directors over the period 1893 to 1907 in the U.K. Although insider trading was profitable, we find relatively few instances of directors who exploited their informational advantage.Corporate Governance;Insider Trading;London Stock Exchange

Managers, Firms and (Secret) Social Networks:The Economics of Freemasonry

This paper studies the relationships between managers’ a¢ liations with Freema- sonry and companies' performance. Using a unique data set of 410 companies quoted on the London Stock Exchange between 1895 and 1902, I find that Masonic managers were associated with greater access to credit in small and young companies whose se- curities where traded over the counter. These companies earned higher profits, but the effect is not statistically significant. On the other hand, large publicly quoted corpora- tions that were managed by Freemasons did not obtain greater access to credit; they had lower profiys and lower Tobin's Q. These findings help to understand how social networks are related to companies' performances. Although social networks help to resolve agency problems between lenders and borrowers in firms that have difficulties in obtaining debt finance, in larger publicly quoted companies they are associated with worse agency conflicts between managers and shareholders and with worse economic performance.