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

Abstract

There have been claims that British capital was not well deployed in Victorian Britain. There was, allegedly, a lack of support for new and dynamic companies in comparison to the situation in Germany and the United States. We find no evidence to support these claims. The London Stock Exchange welcomed young, old, domestic and foreign firms. It provided funds to firms in old, existing industries as well as patenting firms in “new-tech” industries at similar costs of capital. If investors did show a preference for older and foreign firms it was because those firms offered investors better long-run performance. In addition, we show some evidence that investors who worked in the same industry and lived close to the firm going public were allotted more shares in high-quality initial public offerings (IPOs).