Assessing convergence in European investment banking patterns until 1914

Retracing the financial revolutions that took place in continental Europe in the 19th century, this work focuses on investment banking patterns’ comparison in France, Germany and, especially, Italy, in the long run. Besides supporting the industrialization process, in fact, major large investment banks probably represented the most important financial innovation after the establishment of issuing banks and of standardized tradable public debt. As such, they had a relevant role in building and shaping those countries’ emerging financial and credit systems, giving birth to modern banking. The paper considers great banks’ evolution between the 1860s and the Great War, verifying and assessing differences and similarities among them, taking into consideration the structure of single banks. Quantitative analysis shows that relevant differences emerged in the evolution of investment banking patterns in the three countries before 1914. The deepening of these differences during the period supports the hypothesis that divergence, rather than convergence, characterized investment banking patterns in continental Europe. The paper eventually tries to give reasons for such an outcome referring to institutional frameworks’ peculiarities, rather than relying on classical explanations involving the permanence of economic growth differentials among countries or of different speeds in their economic convergence.