Spreading the net: distance, shareholding and the geography of risk in England and Wales 1870-1935

Green, David and Rutterford, Janette (2009). Spreading the net: distance, shareholding and the geography of risk in England and Wales 1870-1935. In: Economic History Society Annual Conference, 3-5 Apr 2009, University of Warwick.

URL: http://www.ehs.org.uk/ehs/conference2009/Assets/EH...


Geographers have long been aware of the importance of the friction of distance as an impediment to the flow of information. Studies of the diffusion of information have emphasized how the take up of innovation depends on the spatial location of individuals. Drawing on these ideas, this paper explores the relationships between individual shareholders and types of shareholdings. Different share types and securities (i.e. ordinary, preference, debentures) carried different levels of risk. Better access to information could help to reduce such risk and as such proximity to sources of financial knowledge was an important factor in influencing the geographical pattern of share ownership in any given company. Over time, information became more widely available through the financial press, a growing number of investment manuals and an increase in the number of stockbrokers and accountants. Prompted by improvements in communications and the spread of financial information, did the relationships between companies and investors change? This paper addresses that question by exploring the relationships between distance and risk through an analysis of the geography of shareholding of some 38,000 individual shareholders in England and Wales between 1870 and 1935. It pays particular attention to the importance of gender as well as distance in shaping the pattern of shareholding during this period. At the start of the period, women tended to prefer less risky types of shares and also generally lived further away from company headquarters. By contrast, male investors tended to prefer riskier ordinary shares and typically were located closer to company offices. Over time, these differences diminished. Spatial differences for both male and female shareholders became less important as communications improved and financial information became more widely available. This in turn helped to widen the geographical scope from which investors were drawn. This was particularly important for women who increasingly invested in riskier, ordinary shares. Over time, therefore, the distances between owners of ordinary shares and company headquarters increased. Companies increasingly drew their shareholders from a wider geographical pool. Most explanations of the growth in the number of shareholders have focused on aspects of investment such as the availability of lower share denominations, the relative cost and returns of share ownership and increased company flotations. The implications of this research are that the geographical diffusion of share ownership was also a key component in understanding investment practices and encouraged a wider range of individuals to become shareholders. As such, geography played an important part in the construction of Britain as a nation of shareholders.

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