European Business Schools Librarian's Group

IESE Research Papers,
IESE Business School

No D/700: The value of private banks in corporate governance: Evidence from the Armstrong investigation

Miguel Cantillo ()
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Miguel Cantillo: IESE Business School, Postal: Av Pearson 21, 08034 Barcelona, SPAIN

Abstract: The paper studies the market reaction to the withdrawal of a prominent private bank -Kuhn Loeb- from the board of several firms. The event study shows that although Kuhn Loeb added significant value to the firms where it had a board seat, most of this value came from reduced industry competition. Moreover, it seems that weaker competition manifested itself in monopoly rather than monopsony power. This article analyzes the event's context -the Armstrong Investigation in 1905- and the political currents that eventually prevented private banks from being activist shareholders in the United States.

Keywords: Antitrust; Corporate governance; Financial history

JEL-codes: G21; G24; K21; L41; N21

39 pages, July 17, 2007

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