This article studies how equity ownership and corporate control were separated in the United States. Initially, railroads and industrial firms were tightly controlled by a few shareholders; this situation was altered in the 1890's by massive mergers and reorganizations, which allowed private banks to control railroads and industrial firms. Between 1912 and 1939, bank control faded away as a result of a political reaction against financial institutions. Using stock-market data from 1914, I show that the eviction of banks from corporate boards depressed firm values by about 7 percent, and that part of this value came from cartelization.

This article studies how equity ownership and corporate control were separated in the United States. Initially, railroads and industrial firms were tightly controlled by a few shareholders; this situation was altered in the 1890s by massive mergers and reorganizations, which allowed private banks to control railroads and industrial firms. Between 1912 and 1939, bank control faded away as a result of a political reaction against financial institutions. Using stock-market data from 1914, the author shows that the eviction of banks from corporate boards depressed firm values by about 7 percent and that part of this value came from cartelization.