Universal banking in pre-World War I Germany: Model or myth?

This paper underscores the influence of political and legal environments and historical accident in shaping financial systems and in determining their ability to promote growth. The study suggests that many widely cited characteristics of the German banking system emerged only to a limited extent during industrialization. Many features that did appear were unrelated to the banks' universal structure, and provided no exceptional impetus to growth. I hypothesize that institutional banking design generally has little impact on capital mobilization or risk diversification. I conclude by questioning the usefulness of the Gerschenkronian framework for understanding problems of financial system design and by proposing an alternative agenda structured around theoretical principles. (C) 1999 Academic Press.