Distributable profit in nineteenth-century British regulated industries

Abstract

In a recent paper, Parker (1990) proposed that corporate financial reporting and auditing regulation in major nineteenth-century British industries was associated with concerns about monopoly powers, privileges granted by the State and financial and physical safety. This paper examines whether these factors can explain variation in the use of distributable profit for regulating dividends in special legislation and private acts of Parliament in four of the nineteenth-century industries covered by Parker, namely banking, railways, gas and insurance. It is argued that the use of dividend restrictions based on distributable profit was associated with concerns about monopoly power in these industries, but was not associated with issues of privilege or safety. Other explanations, including agency theory, are considered and rejected.