Dr. San Martín-Mosqueira, Pablo

This study analyses the impact of firm-level variables as well as country-level institutional factors on firm value in the Latin American region. The theoretical framework used to develop the research hypotheses has followed a corporate governance approach. The sample includes public firms from Argentina, Brazil, Chile, Colombia, Mexico, and Peru for the 1997–2013 period. The main findings indicate that ownership concentration, capital structure, and dividend policy are significant drivers of the market value of the firm. The results from determinants at the country-level show that legal enforcement and regulatory systems positively impact the market value of the firm, whilst the findings show unexpected results concerning the development of the financial system.

The goal of this paper, which follows a corporate governance approach, is to assess whether within country changes in governance (e.g. in legal and regulatory systems and financial development) and changes in corporate ownership concentration can predict a change in the value of Latin American firms. Using fixed-effect panel data models with a representative sample of firms for the period from 1997 to 2013, we observe that the investors’ rights and their legal protection as well as the rule of law are associated with a premium in the firm market value. Contrary to what was expected, in immature financial markets, as found in Latin America, firms take advantage of both the asymmetries of information and the multiple market frictions to be overvalued. So, as the financial system develops, firm value drops. At the firm-level, results confirm the hypothesis of the expropriation of minority shareholders.

Using a sample of 595 firms listed in the capital markets of Argentina, Brazil, Chile, Colombia, Mexico, and Peru for the period of 2000---2015, we confirm prior literature by showing that when power distribution among several large shareholders (contestability) increases, firms’ financial performance is enhanced. More interestingly, we find that these relations are even more significant in family-owned firms, emphasising the relevance of contesting control in this kind of firm. Furthermore, contestability has a greater influence in family firms that have the most concentrated ownership. We also find that the legal framework attenuates the impact of the balance of ownership. Here, contesting control acts as an internal corporate governance mechanism that provides an alternative to the external legal setting. Taken together, our results mean that in institutional settings characterised by weak investor protection and possible conflicts of interest among shareholders, oversight by multiple large, non-related shareholders (balanced ownership concentration) becomes an important governance mechanism.