Private Banks as Corporate Shareholders: Lessons from History

In the U.S. in 1906, the prominent private bank Kuhn Loeb – prompted by the scandal of the Armstrong Investigation – withdrew from the boards of all non-bank corporations. This historical announcement changed the course of corporate governance, and ultimately prevented private banks from being activist shareholders in the United States. In the paper “The Value of Private Banks in Corporate Governance: Evidence From the Armstrong Investigation,” IESE finance professor Miguel Cantillo looks at Kuhn Loeb’s lessons and shows why it made sense to phase out financial capitalism, even though it had undeniable benefits to some shareholders.