SAFE Financial History Data Projects

Dr. Stéphanie Collet Research Center SAFE Goethe University

IBF-Workshop 2018: Das Bankarchiv als Datenressource II Datenprojekte / datenbasierte finanzhistoriche Forschung Financial History Data Project @SAFE

1. German Database in the Interwar Period Paper : „The Berlin in the ´Great Disorder´ ” With Caroline Fohlin (Emory University)

2. German Firm-Level Database in the Interwar Period Paper: „Firms in Troubled Times: What does it Take to Survive?“ With Dennis Gram (SAFE Research Center, Goethe University)

Other SAFE Paper: „Capital Structure in the Interwar Period: The Impact of Economic Crises on Managerial Risk-Taking” Marius Liebald and Uwe Walz

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The Berlin Stock Exchange in the “Great Disorder”

Stephanie Collet Research Center SAFE, Goethe University

Caroline Fohlin Emory University Research Question

Were German financial markets still functioning during the “Great Disorder”?

How much are able to bear?

This paper provides: - First ever comprehensive daily stock price series for 1920’s - First paper on the German using information on the trades

This paper is part of a project entitled “Financial History Database” which is funded by Research Center SAFE. The project and paper started mid 2017.

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Stock Database in Germany

Before WWI • GESIS: 16 historical studies based on data • Some main sources: Donner (1934), Eube (1998), Fohlin (2000), Ronge (2002), Gelman and Burhop (2008) • Period covers: 1870-1914 with monthly data but also daily data on a limited number of stocks

Interwar period • New SAFE project: Collet and Fohlin (2018) on daily or weekly data for all stocks traded in Berlin (1920-1930, we hope 1930-1940 in the future). It includes order book information.

After WWII • Richard Stehle : monthly returns on German stocks from 1954 until 2013 as well as a yearly return of DAX stocks from 1948 until 2011. () • Karlsruhe capital markets database (KKMDB)

20/09/18 provides daily prices of all shares back from 19745 Stock Database in Germany

Use the “Kurszettel” from the Berliner Boersenzeitung

• Daily over 10 years - from January 1921 through December 1930

• Provides trading price or standing bid/ask quotation for all stocks with activity for a given day - 2,505,953 observations - 2,066,572 had a quoted price - 1,544,901 were actual trades

• Indicates order imbalance - Trading happened - Clearing price

• Indicates market direction - Indicates excess buy/sell orders - Bid/Ask Price 20/09/18 6 The Hyperinflation

Median Share Price and C&F100 During the Peak Hyperinflaon, October 1922-December 1923 (Daily) Median 1000000000.00 C&F100 100000000.00

10000000.00

1000000.00 15. Nov. 1923

100000.00

Percent of par value 10000.00 27. Aug. 1923 1000.00 2. Nov. 1923 100.00

Date

End of hyperinfltion-- introduction of Rentenmark

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Late 20’s “Bubble”

Median Share Price and C&F100 in the late 20s, 1926-30 (Daily) Median C&F100 • Mai 12: Reichsbank 220.00 constraint on lending 200.00 • Mai 13: „Black Friday" crash Okt. 24: Back Thursday in NYSE Okt. 29:Back Tuesday in NYSE 180.00 Young Plan submitted

160.00 Election: Nazis (NSDAP): 107 140.00 seats and 18.3% of the votes.

120.00 Percent of par value

100.00 Election: Nazis (NSDAP): 12 seats and 2.6% of the 80.00 vote

60.00

Date

Political Event Economic/Reparations Event Financial/Monetary Event 20/09/18 8 Market Direction

Excess Demand = excess buy orders “Geld”

Excess Supply= excess sell orders “Brief”

Demand exceeded supply most days

Especially strong during end of hyperinflation

20/09/18 9 Order Imbalance

20/09/18 10 Firms in Troubled Times What does it Take to Survive? Evidence From Germany 1920-1940

Stephanie Collet Research Center SAFE, Goethe University

Dennis Gram Research Center SAFE, Goethe University

Research Question Firms in Troubled Times - What does it take to survive? - Is a “relatively high” equity level enough to survive? - Does the sector of the firm matter? - Does banking connection matter? - What are the characteristics of firms which survive “troubled times”?

Troubled Times? Germany 1920-1940 is an excellent case! - Hyper Inflation - 1927 and 1929 Crash - Great Depression

This paper is part of a project entitled “Financial History Database” which is funded by Research Center SAFE. The project started mid 2017 and this paper started in January 2018.

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Data

Data: German firm-level data yearly from 1920 to 1940

- All German “Aktien - Gesellschaften”, ~165.000 pages

- Firm data: Balance Sheet, Profit and Loss, Quoted (or not), Trading Places, Stock Price, , Management Board, Advisory Board, Voting Rights.

20/09/18 13 Database Building

20/09/18 14 Further research

And finally, what could be of great value to us for further research:

- Annual Reports of Firms

- Details on labor inputs and costs (production workers, salaried employees, working proprietors, total wage bill, number of employees,…) during the interwar period

- Microdata on savings accounts during the interwar period

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