Voting Rights, Shareholdings, and Leverage at Nineteenth-Century U.S. Banks

Modern corporate governance is concerned with the tension between the separation of ownership and control and the potential for large controlling shareholders to expropriate from minority shareholders. This article considers this tension in a historical context. Limits were sometimes placed on the number of votes that controlling shareholders could cast in corporate elections. These limits protected minority shareholders by giving them relatively more voting than cash-flow rights. The evidence shows that voting limits led to less shareholder concentration and less leverage. Banks with less concentrated ownership adopted policies that notably reduced insolvency risk.