'Veritable gold mines before the arrival of railway competition': but did dividends signal rates of return in the English canal industry?

Dividends can provide a tangible signal of earnings, but this function depends upon characteristics of financial reporting that were not always present in early financial capitalism. Although eighteenth-century English canal companies offered low-risk securitized capital approved by Parliament and were important to the development of financial capitalism, little is known about the economic state of the canal industry, beyond observed dividend levels. This article estimates rates of return on equity for a set of major English canals, but shows that their financial reporting under-represented equity inputs so that dividend rates did not reliably signal operating returns or equity-based rates of return. [ABSTRACT FROM AUTHOR]