Ownership Dynamics with Large Shareholders: An Empirical Analysis

86 Pages Posted: 29 Nov 2011

See all articles by Marcelo Donelli

Marcelo Donelli

affiliation not provided to SSRN

Borja Larrain

Pontificia Universidad Catolica de Chile

Francisco Urzúa I.

City University London - Sir John Cass Business School

Date Written: November 29, 2011

Abstract

We study the empirical determinants of corporate ownership dynamics in a market where large shareholders are prevalent. We use a unique, hand-collected 20-year data-set on the ownership structure of Chilean companies. Controllers’ block-holdings are on average high -as in continental Europe, for instance- and quite stable over time. Controllers still make nontrivial changes to their holdings through issuance and block trades. In a typical year controllers’ block-holdings decrease (increase) by 5 percentage points or more in approximately 6% (7%) of firms. Few of these events are associated with changes in the identity of the controller although about half are correlated with changes in the size or composition of the board of directors. We find that the separation between controller’s voting and cash-flow rights reduces the likelihood of ownership dilution. Dilution is preceded by high stock returns, and predicts low stock returns in the future (particularly when done through issuance). Dilution does not seem to be followed by higher investment, debt growth, changes in profitability, or turnover in control.

Keywords: ownership dynamics, large shareholders, pyramids, market timing

JEL Classification: G32

Suggested Citation

Donelli, Marcelo and Larrain, Borja and Urzua, Francisco, Ownership Dynamics with Large Shareholders: An Empirical Analysis (November 29, 2011). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1966011

Marcelo Donelli

affiliation not provided to SSRN ( email )

Borja Larrain

Pontificia Universidad Catolica de Chile ( email )

Ave. Vicuna Mackenna 4860, Macul
Santiago
Chile

HOME PAGE: http://economiayadministracion.uc.cl/personal/blarrain/

Francisco Urzua (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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