Ownership and Capital Structure in Latin America

7 Pages Posted: 8 Feb 2011

See all articles by Jacelly Céspedes

Jacelly Céspedes

Instituto de Estudios Superiores de Administración (IESA)

Maximiliano Gonzalez

Universidad de los Andes; Universidad de los Andes, Colombia - School of Management

Carlos Alberto Molina

IESA

Date Written: March 31, 2009

Abstract

This study evaluates the capital-structure determinants of Latin American firms using a comprehensive sample covering seven countries. Firms in the region have debt levels similar to those of U.S. firms, which is puzzling, given that Latin American firms experience relatively lower tax benefits and higher bankruptcy costs. This study argues that ownership-concentrated firms avoid issuing equity because they do not want to share control rights. Latin American firms have high ownership concentration, which creates an ideal setting to study how ownership concentration explains firms' capital structure. Consistent with the control argument, this study finds a positive relation between leverage and ownership concentration, when losing control becomes an issue. Also, the study shows a positive relation between leverage and growth. In addition, the study reports that other determinants that do not proxy for control rights are consistent with previous findings. Firms that are larger, have more tangible assets, and are less profitable are also more leveraged.

Keywords: Capital Structure, Ownership Control, Emerging Markets, Latin America

JEL Classification: G3, G32

Suggested Citation

Céspedes, Jacelly and Gonzalez, Maximiliano and Molina, Carlos Alberto, Ownership and Capital Structure in Latin America (March 31, 2009). Journal of Business Research, Vol. 63, No. 3, 2010, Available at SSRN: https://ssrn.com/abstract=1755785

Jacelly Céspedes

Instituto de Estudios Superiores de Administración (IESA) ( email )

C/ Campo Santo de los Mártires, 7
San Bernardo 1010, Caracas, Córdoba 14004
Venezuela

Maximiliano Gonzalez (Contact Author)

Universidad de los Andes ( email )

Calle 21 No. 1-20
Costado Occidental
Bogotá, AK Cundinamarca 1
Colombia
573144869255 (Phone)

Universidad de los Andes, Colombia - School of Management ( email )

Carrera Primera # 18A-12
Bogotá
Colombia

Carlos Alberto Molina

IESA ( email )

IESA, dept of Finance
Av. IESA, San Bernardino
Caracas, DF 1010
Venezuela
+58-212-555.4551 (Phone)
+58-212-555.4446 (Fax)

HOME PAGE: http://www.iesa.edu.ve/profesores-e-investigacion/profesores/P088

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