Financing the Beer Industry

Along with Graeme Acheson and Christopher Coyle, I've recently written a paper entitled "Happy Hour Followed by Hangover: Financing the UK Brewery Industry, 1880-1913". The QUCEH working paper version is available here. The paper examines the 'brewery bubble' which occurred in the UK in the late 1890s and early 1900s. This episode provides us with interesting insights for modern-day financial markets because many of the breweries issued debt finance to fund their purchase of their pub chains. This debt financing by the breweries resulted in a tripling and quadrupling of the prices of pubs. However, the pub bubble burst, resulting in the ruination of many breweries and huge losses for investors.

Here is the paper's abstract:

In the last 15 years of the nineteenth century c.300 British brewers incorporated and floated securities on the stock market. Subsequently, in the 1900s, the industry suffered a long-lived hangover. In this paper, we establish the stylised facts of this transformation and estimate the gains enjoyed by brewery investors during the boom as well as the losses suffered by investors during the bust of the 1900s. However, not all brewery equity shares suffered alike.  We find that post-1900 performance correlates positively with capital-market discipline and good corporate governance and negatively with family control, but does not correlate with indebtedness.