The Impact of Chilean Firms' Ownership Structures on Performance and Disclosure Levels

Abstract

Lefort and Walker (2007) find serious agency problems between controlling insider and outside minority shareholders in Chile. This study examines the impact of insiders' ownership and institutional holdings on firm performance and disclosure levels of publicly traded firms in Chile. The data from 70 firms from 1996-2005 is used to test the impact of ownership concentration, and institutional investments on firm performance and disclosure levels. When insider ownership levels reach 60 percent, we find evidence for the convergence-of-interest hypothesis between inside shareholders and institutional investors in positively affecting the firms' growth performance, but not firm values. Our findings also suggest institutional holdings and insider ownership levels negatively affect disclosure levels. Agency theory is used to explain the findings that are compared to the existing literature in global corporate governance, and its consequence for adopting IFRS by Chilean listed firms in 2009.

Keywords: Private Social Security, Corporate Governance, Ownership Structure

JEL Classification: G31, G33