The Economic Benefits of Political Connections in Late Victorian Britain

Abstract

The late Victorian era was characterized by close links between politicians and firms in the United Kingdom, with up to half of all members of Parliament serving as company directors. We analyze 467 British companies over the period 1895 to 1904. An analysis of election results shows that the election of a new tech director is associated with a 2 percent to 2.5 percent increase in that firm's share price, whereas old tech firms were unaffected by the electoral fortunes of their directors. New technology firms with political directors were more likely to undertake seasoned issues of both equity and debt.

The Secret Ballot and the Market for Votes at 19th-Century British Elections

“…First, Rubinstein's (1974) careful study of the value of MPs' probate wills indicates that there was more wealth concentrated in the House of Commons in the early years of the 20th century than at any time during the 19th century. Recent work also shows that the political connections inherent in a parliamentary seat remained valuable enough late into the 19th century that MPs could make significant sums serving as corporate directors (Braggion & Moore, 2013). At the very least, MPs could reasonably expect to recoup their electioneering expenses (personal communication with Braggion and Moore).…”

Impediments to the Schumpeterian Process in the Replacement of Large Firms

“…10 The industry classification for some companies requires the authors' subjective judgement. As a measure of innovation, we adopt the protocol of Braggion and Moore (2013) to construct an indicator, new tech, in which a firm is assigned the value of one if the firm operates in one of five sub-sectors: Chemicals (bleaching powder, fertilizers, and explosives), Electricity supply, Electricity generation, Bicycle, or Motorcar, and zero otherwise. Firms are assigned the new tech indicator based on the description of the firm's business in the directories.…”

Capital Market Development Over the Long Run: The Portfolios of UK Life Assurers Over Two Centuries

“…The rationale for including this variable is that studies have shown that British companies in this era which had politicians on their boards behaved differently than their peers (Braggion and Moore, 2013;Campbell and Turner, 2011). In the case of life assurance companies, having a politician on the board may mean, for example, that the company invests more in government bonds.…”