Managing Agency Problems in Early Shareholder Capitalism: An Exploration of Liverpool Shipping in the 18th Century

61 Pages Posted: 30 May 2012

See all articles by Brian S. Silverman

Brian S. Silverman

University of Toronto - Rotman School of Management

Paul L. Ingram

Columbia Business School - Management

Date Written: May 30, 2012

Abstract

We exploit a historical setting that offers an unusually clean test of the relationship between asset ownership and management incentives: captain ownership of vessels engaged in transatlantic shipping during the 18th century. Although contingent compensation aligned incentives between captains and shipowners regarding most events, there existed one hazard that could not easily be managed by contractual incentives: the threat of capture by privateering vessels of an enemy nation. We exploit variation over time and across routes to explore the relationship between the capture threat and equity ownership. We find that vessels were significantly more likely to have a captain-owner when they undertook wartime voyages on routes that were particularly susceptible to encounters with enemy privateers. We also find, after accounting for endogeneity, that vessels with captain-owners were less likely to be captured than those with non-owner captains.

Keywords: agency theory, asset ownership, incentives, compensation, shipping, maritime trade

JEL Classification: D23, J33, L14, L23, L91

Suggested Citation

Silverman, Brian S. and Ingram, Paul L., Managing Agency Problems in Early Shareholder Capitalism: An Exploration of Liverpool Shipping in the 18th Century (May 30, 2012). Available at SSRN: https://ssrn.com/abstract=2070887 or http://dx.doi.org/10.2139/ssrn.2070887

Brian S. Silverman (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Paul L. Ingram

Columbia Business School - Management ( email )

3022 Broadway
New York, NY 10027
United States

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