Emilie BONHOURE, PhD Student from the joint TBS & TSM Doctoral Program, presented her thesis defense to obtain a PhD in Management Science. The defense took place on June 8th, 2020 and explores several modern corporate finance theories in a historical context.

Paris-Listed Firms at the Turn of the 20th Century

Did Modern Corporate Finance Theories Already Work?

The rationale behind Emilie’s thesis subject is to assess whether the findings recently suggested about topics like corporate dividend policies, agency issues, or firm financing, and tested on very modern corporations could be applicable to an earlier and different context.

Thesis abstract

To do so, we examine the companies listed on Paris stock markets at the turn of the 20th century. First focusing on the general agency framework, we examine whether this model could be at play within pre-WWI companies. We do find that this was the case. Specific features highlighted by recent studies about earlier corporations indeed provide support for the fact that the today-called “agency” issues were already critical to them. Further, contemporary authors did identify these issues as particularly salient for companies but also for the investors potentially willing to participate in their emergence. In this general context of high asymmetry of information and of resulting critical “agency” conflicts, the financing of innovation and thus the contribution of financial markets to growth are questioned. In particular, we show that the innovative firms of the time (the ones operating in 2nd-IR sectors) benefitted from a mixed support from Paris stock markets.

Measuring potential favourable financing conditions by a higher Tobin’s Q, we find that 2nd-IR companies did benefit from a sort of help from these markets in financing their growth. On the contrary, measuring it by the dividend yield provides a less clear result. The firms already financed had to compensate their shareholders for the risk they took. They thus had to pay dividends out. The last parts of this thesis examine the dividend policies implemented by Paris-listed firms at the turn of the 20th century. Focusing first on the ones actually implemented, we provide further support for the agency explanation of dividends, notably showing that these dividends were mostly paid to decrease one specific type of agency costs, speculative monitoring ones.

Second, we compare these actual payout policies with the ones fixed in a statutory rule of profit allocation, which committed to the distribution of a certain percentage of profits to shareholders. Doing so could help to assess whether firm controllers strictly followed this statutory rule and did not take advantage of the potential and allowed deviations from it to extract as many benefits as they could at the expense of outsiders and minority shareholders. We show that they did allocate a percentage of profits consistent with the one expected in average by all shareholders. Although several interpretations could be made of this result, it could be explained by the fact the statutory rule was a good way to mitigate conflicts between firm controllers and outsiders

Members of the Jury

  • Mr Laurent GERMAIN, Professor, TBS Education, Thesis Director
  • Mr David LE BRIS, Associate Professor, TBS Education, Thesis Co-Director
  • Mr Gilles CHEMLA, CNRS Director of Research, Paris Dauphine University & Professor, Imperial College London, Rapporteur
  • Mr Marc DELOOF, Professor, University of Antwerp, Rapporteur
  • Ms. Janette RUTTERFORD, Professor, The Open University Business School, Member of the Jury
  • Mr Pierre-Cyrille HAUTCOEUR, Director of Studies, EHESS & Associate Professor, Paris School of Economics, Member of the Jury
  • Ms. Catherine CASAMATTA, Professor, Université Toulouse 1 Capitole, Member of the Jury
Tbs Phd Doctoral Program

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