Abstract
Until the banking reform in 1936, banks and industrial companies in Italy were strongly intertwined (both in terms of ownership and interlocking directorates). Using Imita.db—a large dataset containing data on over 300,000 directors of Italian joint-stock companies—this paper analyzes what would have happened to the Italian corporate network in the years 1913, 1921, 1927 and 1936 if the German-type universal banks and their directors would have not been there. Our test shows that new centers of the system would have emerged (financial, electricity, and phone companies), confirming the interconnected nature of the Italian capitalism. We also analyze two industries (textiles and iron and steel) characterized by different labor-to-capital intensities to check for sectoral differences. Contrary to conventional wisdom, we find that local banks were important in funding both industries.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Indeed, a bank cannot become “universal” without investment banking operations to perform. As investment banking requires the use and intermediation of securitized financial instruments, universal banks generally worked with, rather than against, active securities markets (Fohlin 2015).
The necessity to introduce new methodologies and the opportunity to integrate much more economic, business and social history has been recently maintained by Jones et al. (2013).
Imita.db is one of the worldwide largest datasets on joint-stock companies in historical perspective. For details, see: Vasta (2006). The database is available on line: http://imitadb.unisi.it.
During the period investigated in this paper, the 1882 Commercial Code regulated corporate governance in Italy. This had designed a two-board system of corporate administration in which the assembly of the shareholders had the legal authority for appointing the two following boards: (1) the board of directors (Consiglio di amministrazione), which was the executive body of the assembly of the shareholders. This usually included both inside and outside directors; (2) the board of syndics (Collegio sindacale), which consisted of three or five regular syndics (sindaci effettivi) and two alternate syndics (sindaci supplenti). Their duty was to exercise control and supervision over the management of the company, to monitor the decision taken by the board of directors (Teti 1999). The board of syndics was fundamentally an auditing board and its function did not coincide with those of the supervisory board in the German system. Thus, similarly to what was done in the two major international research projects on corporate networks in comparative perspective (Stokman et al. 1985; David and Westerhuis 2014a) for our analysis we have selected only members of the board of directors.
Bankruptcies and mergers changed over time the landscape of universal banks in Italy: Banco di Roma was founded in 1880, Banca Commerciale Italiana in 1894 and Credito Italiano in 1895. Società Bancaria Italiana was established in 1904 and, because of the crisis of the iron and steel industry in 1911, it merged in 1914 with Società Italiana di Credito Provinciale, establishing the Banca Italiana di Sconto, which bankrupted in 1921. What remained of the Banca Italiana di Sconto gave rise to the Banca Nazionale di Credito, which in 1930 merged with Credito Italiano.
Actually, this procedure defines the upper limits of the universal banks’ influence in the network. For example, if there is an executive director (for instance the president) of a large Italian steel company who has 10 positions in the network, he creates (10 × 9)/2 = 45 ties in the network. Indeed, he is executive director of the steel company, has been co-opted in the board of a universal bank, and has board position in other eight industrial firms (non-executive director). The sub-network created by this individual is centered on the steel company and is more an indicator of the influence of this company rather than of the universal bank. Thus, in the WP version of this article (Drago et al. 2012), we performed also a less demanding counterfactual experiment in which we eliminated only the universal banks, but retained the board positions that their directors held in any other companies. This allows to define the lower limits of the universal banks’ influence in the network. The difference between the actual network and the counterfactual obtained in this way was very small so we eventually decided to drop it.
This index is calculated starting from the matrix that contains all ties.
The degree of a node is the number of edges connected to it.
In the case of a standardized sample, density is an unbiased indicator because comparison concerns samples of the same size.
Comparing to other countries, Italy seems to have followed much the same trend as Germany, even if at lower values. Indeed, the density of the network of Germany’s top 250 firms rose from 7.34 % in 1914 to 16.19 % in 1928 and then fell to 10.47 % in 1938. The US followed the same trend, even if at values much lower than both Germany and Italy (Windolf 2009, 2014). The decline of the density in these countries in the 1930s was the result of the banking laws that prohibited or regulated the financial participation of banks in industries (David and Westerhuis 2014b). A similar trend was observed also in the Netherlands, another bank-centered corporate system. However, here it was not banking laws that put limits on the functioning of banks, but the banks themselves that chose new strategies: after the crisis, Dutch banks returned to trade financing and became reluctant to provide long-term credit to firms (Westerhuis 2014). By contrast, in some other countries, such as France and the UK, the density of the network of the top 250 firms grew steadily from the pre-First World War years to the late 1930s. In the former from 4.90 % in 1911 to 6.30 % in 1937 (François and Lemercier 2014); in the latter from 0.98 % in 1904 to 1.98 % in 1938 (Schnyder and Wilson 2014).
Details on the number and total share capital of all Italian joint-stock companies with at least one million lire of share capital in the four benchmark years and on the number and proportion of firms with affiliation with at least one of the big universal banks are reported in Tables 9, 10, 11, and 12 in the Appendix.
It is worth noting that, in 1913, amongst the top 200 Italian manufacturing firms there were 64 textiles companies and that, in 1936, the corresponding figures still amounted to 41. For a detailed account of the structure of Italian big business, see Giannetti and Vasta (2010, table 2.2).
Conversely, in Germany local banks were affiliated principally with textile and chemical firms (Fohlin 2007).
For a survey on the diffusion of a long lasting dense relationship amongst all firms’ typologies, see Colli et al. (2016).
Banking concentration in Italy was lower than in the England and Germany, but higher than in the USA. Thus, on the eve of the First World War, the four largest Italian credit banks held 15 % of total bank assets. At the same time, the corresponding figure for the top five banks was 36 % in England, 33 % in Germany, and only 4.5 % in the USA (Fohlin 2012).
The Banca Mutua Popolare di Bergamo was founded in 1869 as a credit cooperative to provide funds to the local economy. Members were mainly tradesmen and craftsmen, and some protestant Swiss textile entrepreneurs stood out among them. Nonetheless, the bank showed a preference for smaller deposits and lending to small enterprises. Four years after the Banca Bergamasca di Depositi e Conti Correnti was founded and became the main source of funds to the local cotton and silk industries. Both Italian and Swiss entrepreneurs were amongst the bank’s shareholders, directors and borrowers. In the 1920s the bank pursued rapid and risky expansion by lending and assuming large equity stakes in connected industrial borrowers which eventually led to its bankruptcy in 1932. In 1891 the catholic bank Piccolo Credito Bergamasco was founded and it also became an important source of funds to the local economy. In 1925 a fourth local bank, the Banca Industriale di Bergamo, was created and soon developed strong ties particularly with Italcementi, Italy’s largest cement producer headquartered in Bergamo (Romani 2011).
References
Aganin A, Volpin P (2005) History of corporate ownership in Italy. In: Morck RK (ed) A history of corporate governance around the world: family business groups to professional managers. University of Chicago Press, Chicago, pp 325–365
Baccini A, Vasta M (1995) Una tecnica ritrovata: interlocking directorates nei rapporti tra banca e industria in Italia (1911–1936). Riv Stor Econ 12(2):219–251
Battilossi S (2009) Did governance fail universal banks? Moral hazard, risk taking, and banking crises in interwar Italy. Econ Hist Rev 62(special issue):101–134
Borgatti SP (2003) The key player problem. In: Dynamic social network modeling and analysis: workshop summary and papers. National Academy Press, p 241
Borgatti SP (2005) Centrality and network flow. Soc Netw 27:55–71
Borgatti S, Carley K, Krackhardt D (2006) On the robustness of centrality measures under conditions of imperfect data. Soc Netw 28:124–136
Brambilla C (2012) Miscarried innovation? The rise and fall of investment banking in Italy, 1860s–1930s. Entrep Hist 67:97–117
Cameron R (1967) Banking in the early stages of industrialization. Oxford University Press, New York
Carnevali F (2005) Europe’s advantage. Banks and small firms in Britain, France, Germany, and Italy since 1918. Oxford University Press, Oxford
Cohen J (1967) Financing industrialization in Italy, 1894–1914: the partial transformation of a Late-Comer. J Econ Hist 17:363–382
Colli A, Rinaldi A, Vasta M (2016) The only way to grow? Italian business groups in historical perspective. Bus Hist 58:30–48
Confalonieri A (1974–1976) Banca ed industria in Italia 1894–1906, 3 vols. Banca Commerciale Italiana, Milan
Confalonieri A (1982) Banca e industria in Italia dalla crisi del 1907 all’agosto 1914, 2 vols. Banca Commerciale Italiana, Milan
Confalonieri A (1992) Banche miste e grande industria in Italia 1914–1933, vol I: Introduzione. L’esperienza della Banca Commerciale e del Credito Italiano. Banca Commerciale Italiana, Milan
Confalonieri A (1997) Banche miste e grande industria in Italia 1914–1933, vol II: I rapporti banca-industria. Banca Commerciale Italiana, Milan
Conti G (1999) Le banche e il finanziamento industriale. In: Amatori F, Bigazzi D, Giannetti R, Segreto L (eds) Storia d’Italia. Annali 15. Einaudi, Turin, pp 441–504
Conti G, Ferri G (1997) Banche locali e sviluppo economico decentrato. In: Barca F (ed) Storia del capitalismo italiano dal dopoguerra a oggi. Donzelli, Rome, pp 429–465
David T, Westerhuis G (eds) (2014a) The power of corporate networks. A comparative and historical perspective. Routledge, London
David T, Westerhuis G (2014b) Comparing corporate networks in a long-term perspective. In: David T, Westerhuis G (eds) The power of corporate networks: a comparative and historical perspective. Routledge, London, pp 1–28
De Nooy W, Mrvar A, Batagelj V (2011) Explanatory social network analysis with Pajek. Cambridge University Press, New York
Drago C, Ricciuti R, Rinaldi A, Vasta M (2012) A counterfactual analysis of the bank-industry relationship in Italy, 1913–1936. Paper presented at SIDE-ISLE 2012—eight annual conference, Roma, 13–15 December 2012
Fohlin C (1998) Fiduciari and firm liquidity constraint: the Italian experience with German-style universal banking. Explor Econ Hist 35:83–107
Fohlin C (1999) Capital mobilisation and utilisation in latecomer economies: Germany and Italy compared. Eur Rev Econ Hist 3:139–174
Fohlin C (2007) Finance capitalism and Germany’s rise to industrial power. Cambridge University Press, New York
Fohlin C (2012) Mobilizing money. How the world’s richest nations financed industrial growth. Cambridge University Press, New York
Fohlin C (2015) Financial systems. In: Diebolt C, Haupert M (eds) Handbook of cliometrics. Springer, Heidelberg
François P, Lemercier C (2014) Ebbs and flows in French capitalism. In: David T, Westerhuis G (eds) The power of corporate networks: a comparative and historical perspective. Routledge, London, pp 149–168
Gerschenkron A (1962) Economic backwardness in historical perspective. Cambridge University Press, Cambridge
Giannetti R, Vasta M (2010) Big business. In: Colli A, Vasta M (eds) Forms of enterprise in 20th century Italy. Boundaries, structures and strategies. Edward Elgar, Cheltenham-Northampton, pp 25–51
Jones G, van Leeuwen MHD, Steve Broadberry S (2013) The future of economic, business and social history. Scand Econ Hist Rev 60:225–253
Luzzatto Fegiz P (1928) Il consiglio di amministrazione e l’indipendenza delle imprese. G Econ Riv Stat 43:197–231
Mintz BA, Schwartz M (1985) The power Structure of American Business. University of Chicago Press, Chicago
Morck RK (ed) (2005) A history of corporate governance around the world: family business groups to professional managers. University of Chicago Press, Chicago
Mori G (1992) L’economia italiana dagli anni ottanta alla prima guerra mondiale. In: Mori G (ed) Storia dell’industria elettrica in Italia, vol 1: Le origini. Laterza, Roma-Bari, pp 1–106
Piluso G (2009) Le banche locali in Italia: pluralità e segmentazione. In: Conti G, Feiertag O, Scatamacchia R (eds) Credito e nazione in Francia e in Italia (XIX–XX secolo). Plus-Pisa University Press, Pisa, pp 245–267
Rinaldi A, Vasta M (2005) The structure of Italian capitalism, 1952–1972: new evidence using the interlocking directorates technique. Financ Hist Rev 12:173–198
Rinaldi A, Vasta M (2012) The Italian corporate network after the “Golden Age” (1972–1983): from centrality to marginalization of state-owned enterprises. Enterp Soc 13:378–413
Rinaldi A, Vasta M (2014) Persistent and stubborn. The state in Italian capitalism: 1913–2001. In: David T, Westerhuis G (eds) The power of corporate networks: a comparative and historical perspective. Routledge, London, pp 169–188
Romani M (2011) Costruire la fiducia. Istituzioni, élite locali e mercato del credito in tre province lombarde (1861–1936). Franco Angeli, Milano
Schnyder G, Wilson J (2014) The structure of networks: the transformation of UK business, 1904–2010. In: David T, Westerhuis G (eds) The power of corporate networks: a comparative and historical perspective. Routledge, London, pp 48–65
Stokman FS, Ziegler R, Scott J (eds) (1985) Networks of corporate power. A comparative analysis of ten countries. Polity, Cambridge
Teti R (1999) Imprese, imprenditori e diritto. In: Amatori F, Bigazzi D, Giannetti R, Segreto L (eds) Storia d’Italia. Annali 15. L’industria. Einaudi, Torino, pp 1211–1303
Toninelli PA, Vasta M (2010) State-owned enterprises (1936–83). In: Colli A, Vasta M (eds) Forms of enterprise in 20th century Italy. Strategies, structures and boundaries. E. Elgar, Cheltenham, pp 52–86
Vasta M (2006) Appendix. In: Giannetti R, Vasta M (eds) Evolution of the Italian enterprises in the 20th century. Physica Verlag (Springer), Heidelberg, pp 269–273
Vasta M, Baccini A (1997) Bank and industry and Italy 1911–1936: new evidence using interlocking directorates technique. Financ Hist Rev 4:139–159
Westerhuis G (2014) The Dutch corporate network: considering its persistence. In: David T, Westerhuis G (eds) The power of corporate networks: a comparative and historical perspective. Routledge, London, pp 89–106
Windolf P (2009) Coordination and control in corporate networks: United States and Germany in comparison, 1896–1938. Eur Sociol Rev 25:443–457
Windolf P (2014) The corporate network in Germany, 1896–2010. In: David T, Westerhuis G (eds) The power of corporate networks: a comparative and historical perspective. Routledge, London, pp 66–85
Zamagni V (1993) The economic history of Italy 1860–1990. Recovery after decline. Clarendon Press, Oxford
Zamagni V (1995) «Interlocking directorates» in Lombardia 1911–1936: primi risultati di una nuova banca dati. In: Ceschi R, Vigo G (eds) Tra Lombardia e Ticino. Studi in memoria di Bruno Caizzi. Casagrande, Bellinzona, pp 377–388
Zorzini M (1925) L’organizzazione dell’industria idroelettrica in Italia. Economia 7(9–10):166–176
Acknowledgments
We thank the editor Claude Diebolt and two anonymous referees for their valuable comments. We would like to thank the participants of the SIDE-ISLE 2012 Eight Annual Conference (Rome, 2012), the 9th BETA Workshop in Historical Economics (Strasbourg, 2013), and the XXXIII ISNA Sunbelt Social Networks Conference (Hamburg, 2013) for their helpful comments. The usual disclaimer applies.
Author information
Authors and Affiliations
Corresponding author
Appendix
Appendix
See Tables 9, 10, 11, 12, 13, 14, 15, and 16.
Rights and permissions
About this article
Cite this article
Vasta, M., Drago, C., Ricciuti, R. et al. Reassessing the bank–industry relationship in Italy, 1913–1936: a counterfactual analysis. Cliometrica 11, 183–216 (2017). https://doi.org/10.1007/s11698-016-0142-9
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11698-016-0142-9