An Efficient Market? Going Public in London, 1891-1911

by Sturla Fjesme (Oslo Metropolitan University), Neal Galpin (Monash University Melbourne), Lyndon Moore (University of Melbourne)

This article is published by The Economic History Review, and it is available on the EHS website


Antique print of the London Stock Exchange. Available at <>

The British at a disadvantage?
It has been claimed that British capital markets were unwelcoming to new and technologically advanced companies in the late 1800s and early 1900s. Allegedly, markets in the U.S. and Germany were far more developed in providing capital for growing research and development (R&D) companies whereas British capital markets favored older companies in more mature industries, leaving new technology companies at a great disadvantage.
In the article An Efficient Market? Going Public in London, 1891-1911 we investigate this claim by obtaining detailed investment data on all the companies that listed publicly in the U.K. over the period 1891 to 1911. By combining company prospectuses, which provide issuer information such as industry, patenting activity, and company age with those company’s investors we investigate if certain company types were left at a disadvantage. For a total of 339 companies (out of 611 new listings) we obtain share prices, prospectuses, and detailed investor information on name and occupation.

A welcoming exchange
Contrary to prior expectations we find that the London Stock Exchange (LSE) was very welcoming to young, technologically advanced, and foreign companies from a great variety of industries. Table 1 shows that new companies were from a great variety of industries, were often categorized as new-technology, and almost half of the companies listed were foreign. We find that 81% and 84% of the new and old technology firms that applied for an official quotation of their shares were accepted by the LSE listing committee, respectively. Therefore, there is no evidence that the LSE treated new or foreign companies differently.

Table 1. IPOs by Industry

  IPOs Old-Tech New-Tech Domestic Foreign
Banks and Discount Companies 4 4 0 0 4
Breweries and Distilleries 13 13 0 12 1
Commercial, Industrial, &c. 155 137 18 125 30
Electric Lighting & Power 11 0 11 9 2
Financial Land and Investment 23 23 0 2 21
Financial Trusts 12 12 0 8 4
Insurance 7 7 0 7 0
Iron, Coal and Steel 20 20 0 20 0
Mines 8 8 0 0 8
Nitrate 3 3 0 0 3
Oil 11 11 0 0 11
Railways 10 9 1 5 5
Shipping 3 3 0 3 0
Tea, Coffee and Rubber 48 48 0 0 48
Telegraphs and Telephones 3 1 2 1 2
Tramways and Omnibus 6 0 6 5 1
Water Works 2 2 0 1 1
Total 339 301 38 198 141

Note: We group firms by industry, according to their classification by the Stock Exchange Daily Official List.

We also find that investors treated disparate companies similarly. We find British investors were willing to place their money in young and old, high and low technology, and domestic and foreign firms without charging large price discounts to do so. We do, however, find that investors who worked in the same industry or lived close to where the companies operated were able to use their superior information to obtain larger investments in well performing companies. Together our findings suggest that the market for newly listed companies in late Victorian Britain was efficient and welcoming to new companies. We find no evidence indicating that the LSE (or its investors) withheld support for foreign, young, or new-technology companies.


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How accounting made financial markets in the Early Modern age

by Nadia Matringe, London School of Economics


In the early modern age, accounting was the site of finance.

From the sixteenth century onwards, the unprecedented growth of international trade and banking gave rise to the great exchange fairs (Lyon, Bisenzone, Castile, Frankfurt, etc.), with international clearing and banking functions. To exploit these new opportunities while limiting risks, a growing number of banks at the fair locations specialised in the commission business, which required a high demand for goods and capital to yield substantial profits.

Both these transformations deeply affected the international payments system. In particular, they gave rise to new uses of accounting as a payment and credit instrument.

The research, to be presented at the Economic History Society’s 2017 annual conference, analyses this transformation and highlights the role of accounting in shaping early modern financial markets. It shows that at that time, accounting tables were not only used as local means of payment through book transfers initiated by oral order: they also became the sole material support for a growing number of international fund transfers and credit operations.

Indeed, as chains of commission increased in length and density, both the exchange and the deposit business changed in form and started to be increasingly operated through the accounting medium.

The classical exchange operations, which usually involved four parties (a drawer, a remitter, a payer and a payee) and the circulation of a bill of exchange between two markets, could now be conducted by two parties through their corresponding accounting systems, on behalf of several clients.

In these transactions, bank A would draw on and remit monies to bank B on behalf of clients who appeared as drawers and remitters by proxy. Payments on both markets took the form of book transfers, and no bill of exchange was issued: banker A simply informed banker B in his usual correspondence to credit and debit the pertinent accounts according to agreed exchange rates.

Such transactions performed multilateral clearance between distant regions of the world, where the bankers’ clients had business.

Two-party exchange transactions reduced to accounting entries also served banking activity at the local level. In this case, at least one side of the exchange transaction (the remittance or the draft) was meant to lend or to borrow money in one of the two markets. The exchange was followed by a rechange in the opposite direction, and at a different rate, and interest was charged according to the differences in exchange rates.

Finally, the taxation of overdrafts on current accounts at the fair location enabled clients to buy bills of exchange on foreign markets without provision, and to postpone payment of those drawn on them. Consequently, deposits in Lyon, Antwerp or Castile could create credit in Florence, Paris, London, etc.

Furthermore, this old fair custom of deferments gave rise in the sixteenth century to autonomous deposit markets whose rate circulated publicly, enabling ‘outsiders’ who otherwise had no business in the fairs, to invest their savings there.

The research thus shows that in the context of the rapid development of international banking centres and the correlated rise of commission trading, accounting made financial markets.

Its function was similar to that of modern algorithms used to match orders and perform financial transactions. Accounting tables were used to make payments, transfer funds, operate clearance and grant interest-bearing loans – all of which could be combined in a single game of book entries in the accounts of corresponding partners.

International trade and banking were supported by a network of interconnected accounting systems. This accounting network appears as a major infrastructure of early modern trade, without which the whole European payment system would have collapsed.