Mobilising Finance and Sustaining Performance: Elite Directors in the British Economy, c.1891—1914

In the economic history literature, the listing of elite directors, including aristocratic ‘nominees’, on the front sheet of new share issue prospectus, has been explained as a device lending credibility to the underlying value of the issuing firm. This thesis offers new perspectives on the literature by examining the role of aristocrats as controllers of essential resources. These resources were of crucial importance to firms operating in mining and transportation, and other industries. Using a dataset of new share issues promoted on the London Stock Exchange (LSE) during the period 1891 to 1914, this thesis examines the determinants of aristocratic representation on the boards of firms and their influence on subsequent performance.
The main findings are as follows. First, the representation of aristocratic elites on boards of directors was influenced by land-related resources that were essential to the firms involved. Second, the agency and resource roles of aristocratic directors enhanced the long-term performance of new share issues. Moreover, it is found that aristocratic directors played a lesser role in influencing performance during periods of tightened regulations. Third, directors’ interlocks and busy boards negatively influenced the subsequent performance of new share issues while the presence of political director on board reduced the negative effect of interlocks on performance. These results suggest that aristocratic elites were not ornamental directors; their presence on boards represented a medium for securing access to essential resources.
The examination of aristocratic directors provided an avenue to test the resource dependence hypothesis during the emergence of new industries when the operations of individual industries were largely separate, with particular demands on certain resources controlled by elites. This allowed a unique and robust examination of the exact effect of resources on performance. The thesis suggests that directors’ resources were of paramount importance to the success of new issues.