ABSTRACT
The 1920s stock boom is most often associated with the profitable activity tied to the 5–6 percent growth. A large part of this growth was linked to the coming of the internal combustion engine and mass production. Along with a description of the manic behavior associated with stock psychology, economic historians generally use an expanded version to explain the stock bubble of the late 1920s. Free cash was dispensed to stockholders in the form of dividends and merger receipts. Monopoly profits would justify and allow fabulous fees for the investment bankers that arranged the mergers, as well as provide the wherewithal to service the debt obligations that financed the consolidations. Using data from the National Bureau of Economic Research prepared under the supervision of Simon Kuznets, we can construct estimates of free cash. Severe data limitations prevent any exact estimation of the direct contributory impact of mergers and acquisitions to the stock bubble of the 1920s.
