Thu Apr 21 09:47:51 EDT 2005
ABSTRACTS IN ECONOMIC HISTORY
(c) 2005 EH.Net
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Name: Hans-Joachim Voth
Email: voth at mit.edu
Institution: Universitat Pompeu Fabra
Co-author: Thomas Ferguson (U Mass)
Title: Betting on Hitler - The Value of Political Connections in Nazi Germany
Internet Address of abstracted work:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=651984
By mail:
Economics Department
UPF
c/Ramon Trias Fargas 25-27
Barcelona-Spain
Language: English
Abstract:
We examine the effect of close links with the NSDAP on the stock
price of listed firms in 1932-33. While earlier work had primarily
analysed the connections between executives and the Nazi party, we
also look at supervisory board membership - the importance of which
is hard to overestimate in the case of German industry. One
implication of our work is that, weighted by stock market
capitalization in 1932, more than half of listed firms on the Berlin
stock exchange had substantive links with the NSDAP. Crucially, stock
market investors recognized the value of these links, sending the
share prices of connected firms up once the new regime was firmly
established. While all firms including unaffiliated ones saw a rise
in their stock prices after Hitler's seizure of power, those with
board members known to favor the party (or backing it financially)
outperformed the market by 6 to 9 percent between January and May
1933. We show that this finding is robust to a range of additional
control variables and alternative estimation techniques.
Bibliography: Voth, Hans-Joachim and Thomas Ferguson. "Betting on
Hitler - The Value of Political Connections in Nazi Germany." SSRN
working paper, 2005.
Subject: H
Geographical Area: 4
Country/Region: Germany
Time Period: 8
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