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The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866-1897

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  • Peter L. Rousseau
Abstract
The rapid growth of deposits in New York City over the three decades following the Civil War is often attributed to the release of pent-up demand for the services that transactions accounts could provide. I advance a complementary explanation that centers on the existence of an increasingly efficient market for bank shares. The stock market was important because it generated price and dividend quotations that signaled depositors about the soundness of individual banks, thereby directing the expansion. At the same time, innovations within the city's banks created conditions under which stock prices became more informative, reducing asymmetries between banks and depositors to a point where confidence in banks could grow. Using a new database of stock prices, dividends, and balance sheet items for traded New York City banks from 1866 to 1897, a series of dynamic panel data models supports the proposed mechanism.

Suggested Citation

  • Peter L. Rousseau, 2010. "The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866-1897," NBER Working Papers 15770, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15770
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    References listed on IDEAS

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    Cited by:

    1. Cotter, Christopher & Rousseau, Peter L, 2022. "Correspondent banking, systematic risk, and the Panic of 1893," MPRA Paper 113340, University Library of Munich, Germany.
    2. Peter Grajzl & Peter Murrell, 2022. "Did Caselaw Foster England’s Economic Development during the Industrial Revolution? Data and Evidence," CESifo Working Paper Series 10088, CESifo.
    3. Mary Eschelbach Hansen, 2014. "Sources of Credit and the Extent of the Credit Market: A View from Bankruptcy Records, Mississippi 1929-1936," Working Papers 2014-09, American University, Department of Economics.
    4. Brownlees, Christian & Chabot, Ben & Ghysels, Eric & Kurz, Christopher, 2020. "Back to the future: Backtesting systemic risk measures during historical bank runs and the great depression," Journal of Banking & Finance, Elsevier, vol. 113(C).
    5. Grajzl, Peter & Murrell, Peter, 2024. "Caselaw and England's economic performance during the Industrial Revolution: Data and evidence," Journal of Comparative Economics, Elsevier, vol. 52(1), pages 145-165.
    6. Jaremski, Matthew & Rousseau, Peter L., 2018. "The dawn of an ‘age of deposits’ in the United States," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 264-281.
    7. Peter Grajzl & Peter Murrell, 2024. "From Status to Contract? A Macrohistory from Early-Modern English Caselaw and Print Culture," CESifo Working Paper Series 11246, CESifo.
    8. Jansson, Walter, 2018. "Stock markets, banks and economic growth in the UK, 1850–1913," Financial History Review, Cambridge University Press, vol. 25(3), pages 263-296, December.
    9. Ama Samarasinghe & Katherine Uylangco, 2022. "Stock market liquidity and traditional sources of bank business," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3107-3145, September.

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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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