The West German capital market and the financing behaviour of public limited companies, 1948-1965 : a reassessment
The objective of this thesis is to identify economic and regulatory issues which affected the development of the West German capital market and the financing behaviour of public limited companies during the early post war period. Following the introductory chapter, the thesis summarises literature on the relevance of capital structure in imperfect markets and discusses findings on the relationship between financial development and economic growth in consideration the historical circumstances of the early post war period. Chapter three provides a detailed account of the West German currency reform which looks beyond the conversion of monetary assets as it incorporates the accompanying conversion of company balance sheets. An analysis of the conversion of balance sheets shows that companies emerged from the reform with significantly reduced leverage. This finding provides an unconventional interpretation of the observed financing behaviour of West German companies during the early post war period. Chapter four discusses how public policy measures affected the development of the West German capital market during the immediate post currency reform period. It is argued that the policy of partial price controls coincided with a restriction of the capital market in providing funds to private and uncontrolled sectors as public authorities introduced measures which favoured funding in public and price controlled sectors. After having outlined the economic environment of the immediate post war period, the thesis analyses the financing behaviour of a sample of 79 non financial public limited companies between 1952 and 1965. The thesis argues that exceptional circumstances created by the war and the following policy decisions affected companies' financing behaviour. It shows that companies entered the post war period with severely altered capital structures and suggests that internally generated funds and bank loans featured no more prominently during the early post war years than during the following decades.