The stock market and the financing of French companies: 1890-1939.

Summary This work seeks to measure and explain the forms of financing of French companies listed on the Paris stock exchange between 1890 and 1939. The individual census of the financial operations of these companies shows in a new light the contribution of the stock market to the financing and allows a more thorough explanation. Thanks to an original method of measuring self-financing, it is shown that the market's share in the financing of listed companies reached its maximum in the 1920s. This increase is combined with an increase in the share of equities in external financing, at the expense of bonds. Finally, this transformation benefited mainly industrial companies that had previously had difficulty accessing the stock market. The stock market is therefore an effective accompaniment to the second industrial revolution. An analysis of time series and cross-sectional data shows that financial microeconomics does not explain this transformation. Indeed, the increase in taxation or in the costs of the mandate counteract it without really slowing it down. On the other hand, this theory does explain the allocation of capital between firms. These results are all the more interesting because, unlike most studies on this subject, we have individual and precise indicators of agency costs and a non-accounting measure of self-financing. Macroeconomic and institutional arguments better explain the long-term evolution of financing forms. Before 1914, merchant banks and stockbrokers succeeded in reducing savers' distrust of the stock market, and in increasing the number of investors.