Throughout history, capital markets have been central to innovation and the development of new industries, job creation, low unemployment, wealth accumulation, reducing income inequality, improving living standards, and promoting economic growth. In perfect capital markets, firms can easily raise funds for profitable investments. However, market frictions, such as agency costs, liquidity constraints, and asymmetric information, can lead to underinvestment. In this dissertation, I study the financing decisions of firms in a young industry in an environment where securing capital was difficult.

Following the 1859 discovery of gold and silver in Nevada, mine owners incorporated in San Francisco and issued stock. Interestingly, firms had the right to levy assessments on their shareholders. An assessment is a request for additional capital and failure to pay resulted in the loss of shares. Firms relied heavily on assessments to finance their operations. I claim that assessments were more than a peculiar feature of stock ownership; the method of financing addressed particular challenges, making it easier to secure capital. To evaluate my claim, I construct a dataset of assessments levied, daily stock prices, and other relevant data. I use regression analysis and narrative evidence from a credible local newspaper to determine which variables influenced levies and how assessments addressed financing frictions. Collecting capital over several periods and limiting the loss to share ownership helped in reducing the agency costs of free cash and making mining securities attractive investments.

For investors of the San Francisco mining share market, private information and assessments may also affect stock ownership. Because firms voluntarily provided reports to local newspapers, some investors may have information on the prospects of the mine prior to publication. An investor's willingness to pay assessments may also influence the timing of purchase or sale. I use stock transfer data from a major mining company to measure the effect that assessments and private information had on the propensity to sell. Share ownership was geographically diverse, the propensity to sell varied across investors, and there is some evidence that the timing of sales by investors from the Bank of California may be driven by private information.

In addition, I examine whether the market predicted reasonable returns in a setting where active trading in mining securities was fairly new and investors are more likely to speculate. One interesting feature of the firms in my sample is that they owned adjacent mining claims along the vein of the Comstock. I consider the effect of reported strikes on the stock price of firms with adjacent and non-adjacent mines. The results suggest that, on average, the market predicted returns consistent with rational behavior.