We study the association of shareholder returns with liberalization in government policy during Britain's railway run-up of 1844–5. The findings sustain two main claims. First, the railway returns during the run-up were associated with the advent of liberalizing policies, especially related to free trade, enhanced transparency and governance of firms, and industry consolidation. Second, analysis of cross-sectional variation reveals higher returns to large railways in the South and Midlands of England, several of which were leading consolidators. This study is the first to report an association between policy liberalization and run-up returns and to identify consolidators as the prime beneficiaries of the liberalization.
