American Accounting Association 2006 Midwest Region Meeting March 30 – April 1 Chicago, Illinois

Saturday, April 1, 11:00 a.m. to 12:50 p.m.
Concurrent session 6D - Accounting History and Corporate Governance (History, Government and Nonprofit)

Title: The First Books on Investing in the United States of America

Joel E. Thompson Northern Michigan University

ABSTRACT: The purpose of this study is increase understanding of the development of investing practices and the related use of financial accounting and other types of information. Using an extensive list of search terms, seminal books on investing published in the United States of America were identified using WorldCat (2005). Three books are reviewed and analyzed in this study and the relevant portions of two other books are included as well. The earliest book identified is Stocks and Stock-Jobbing in Wall-Street by William Armstrong (1848). His purpose is not only to explain Wall Street operations, but to warn potential investors of "unnatural influences" on the price of securities. He urges investment in those securities with "intrinsic value" rather than in the so-called "fancy stocks" of companies which have never paid a dividend, are not likely to do so, and whose intrinsic value is unknown. Armstrong provides some information on a handful of companies including par value of stock, dividends, debt, and market prices.

The American News Co. in Guide-Book for Investors in Petroleum Stocks (1865) maintains that it requires "judgment and investigation" to select suitable petroleum companies for investment. Much of the book describes the incorporation laws of various states which in several instances include the right of stockholders to obtain company information. In addition, The American News Co. includes lists of petroleum companies, some of which include for individual companies the amount of capital, number of shares, par or share value, subscription price, amount of working capital, location of property, company officers, and address of office. The third book, New York Stock Exchange Manual by Henry Hamon (1865), is more extensive than the other two. Hamon also desires to educate his readers as to the nature of stock market operations and includes descriptions of different types of securities. Most notably is the inclusion in the book of several long lists of companies organized by industry. For some of the companies, especially railroads, Hamon includes information on capital, dividends, market prices, debt, and earnings. In some instances he provides comparative financial information as well as simple ratios, the basics of financial statement analysis.

Collectively, the authors’ main desire is to educate those interested in the stock market on how it operates and the need to be cautious in selecting investments. They acknowledge the importance of information, including accounting information, in selecting investments, but the stock market at this juncture is dominated by the gaming aspects of a rigged casino environment.

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