Paris-Listed Firms at the Turn of the 20th Century : Did Modern Corporate Finance Theories Already Work?

Summary In this thesis, we propose to examine several modern theories of the firm. The objective is to study the results suggested by recent studies on topics such as dividend policies, agency problems, or corporate finance, and tested on modern organizations. In this respect, we study in particular firms that were listed in Paris at the beginning of the 20th century. First, we focus on the general context of agency theory, and try to examine whether this model could be applied to firms in the period before the First World War. We thus show that this was the case. Recent studies of these firms have shown that what are now called "agency problems" were already a major risk for them. Moreover, the contemporary writings of these firms at the beginning of the twentieth century or earlier had perfectly identified these problems as being major for them but also for potential investors ready to participate in their financing. In this general context of information asymmetry and the potentially severe "agency problems" resulting from it, we also question the financing of innovation and thus the contribution of financial markets to their growth. We show that the innovative firms of the time (i.e. the firms of the 2nd Industrial Revolution) benefited from a mixed support from the Parisian stock markets. If we measure this potential support by Tobin's Q, these firms of the 2nd IR benefited from advantageous conditions for their financing. On the contrary, if measured by the dividend rate, this support is much less clear: firms that had already found financing had to remunerate their shareholders: in particular, they had to distribute dividends to them. The last parts of this thesis thus study the dividend policies implemented by firms in Paris at the beginning of the 20th century. We first study the dividend policies actually implemented and show that these dividends were paid in order to reduce agency costs, and in particular in order to reduce speculative monitoring costs. Second, we compare these actual policies to those set by a statutory profit distribution rule, which determined the allocation of a certain amount of profits to shareholders. This comparison could allow us to estimate whether and to what extent those who "controlled" the firm strictly followed this rule, and whether they did not use possible exceptions to it to extract private profits at the expense of outside and minority shareholders. We show that they allocated a share of profits consistent with that expected on average by all shareholders. While several interpretations of this phenomenon are possible, one explanation could lie in the fact that the statutory rule was a good way to limit conflicts between those shareholders who controlled the firm and the others.