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Ownership, financial strategy and performance: the Lancashire cotton textile industry, 1918–1938

Higgins, D., Toms, S. & Filatotchev, I. (2015). Ownership, financial strategy and performance: the Lancashire cotton textile industry, 1918–1938. Business History, 57(1), pp. 97-121. doi: 10.1080/00076791.2014.977873


This article assesses the validity of John Maynard Keynes' claim that the Lancashire cotton industry failed to restructure because the banks as debt holders prevented firms exiting the industry, creating persistent over-capacity. Using case studies from a substantial sample of Lancashire firms, the article explores archival evidence to establish their financial characteristics, to examine their equity and debt finance and the governance roles of directors and outside ownerhip groups. On the basis of this review the article develops hypotheses to suggest alternatives to the view that bank debt was the dominant explantion of firm level behaviour and industry failure. Applying these to a statistical dataset, results show that syndicates of local shareholders, not banks, were an important impediment to the exit of firms. Moreover, syndicates milked firms of any profits through dividends, thereby limiting reinvestment and re-equipment possibilities. Our results show that where laissez-faire fails in response to a crisis, incumbent investors, particularly block-holders, can be an important impediment to corporate restructuring.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in BUSINESS HISTORY on 19 February 2015, available online:
Publisher Keywords: Keynes, Cotton, Banks, Syndicates, Corporate Restructuring
Subjects: H Social Sciences > HB Economic Theory
Departments: Bayes Business School > Management
SWORD Depositor:
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