Private contracting, law and finance

Acheson, Graeme G and Campbell, Gareth and Turner, John D (2019) Private contracting, law and finance. The Review of Financial Studies, 32 (11). pp. 4156-4195. ISSN 0893-9454 (

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In the late nineteenth century Britain had almost no mandatory shareholder protections, but had very developed financial markets. We argue that private contracting between shareholders and corporations meant that the absence of statutory protections was immaterial. Using approximately 500 articles of association from before 1900, we code the protections offered to shareholders in these private contracts. We find that firms voluntarily offered shareholders many of the protections that were subsequently included in statutory corporate law. We also find that companies offering better protection to shareholders had less concentrated ownership.