The Contest to the Control and Firm Value: An Analysis of Latin American Firms

35 Pages Posted: 6 Nov 2015

See all articles by Mauricio Jara-Bertin

Mauricio Jara-Bertin

University of Chile - Business School

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Pablo SanMartín

University of Valladolid

Paolo Saona

Saint Louis University - Madrid Campus

Date Written: November 5, 2015

Abstract

Manuscript type: Empirical.

Research Question/Issue: The power distribution within the organizations is the key issue of the study. We analyze the effect of the contestability to the control of the largest shareholders in relation to the influence on firm value.

Research Findings/Insights: Using a sample of firms from six Latin American emerging economies over the period 1997–2013, we hypothesize that the contestability effect is more prominent when a family or individual investor is the large shareholder. Our results suggest that a high (low) level of contestability results in higher (lower) firm value.

Theoretical/Academic Implications: In a distinctive setting, we analyze an under-explored agency problem, the relation between large and monitoring shareholders, the contestability to control. We emphasize the important role of the second, third, and fourth largest shareholders.

Practitioner/Policy Implications: The interaction among several large shareholders has important consequences for the protection of minority shareholders’ interest, especially in Latin American countries, which have a weaker legal setting and enforcement of law and thus represent a challenge for policymakers.

Keywords: firm value, ownership structure, corporate governance, Latin America, family firms, contestability

JEL Classification: G10, G30

Suggested Citation

Jara-Bertin, Mauricio Alejandro and Lopez-Iturriaga, Felix Javier and SanMartín, Pablo and Saona, Paolo, The Contest to the Control and Firm Value: An Analysis of Latin American Firms (November 5, 2015). Available at SSRN: https://ssrn.com/abstract=2686617

Mauricio Alejandro Jara-Bertin

University of Chile - Business School ( email )

Diagonal Paraguay 257
Santiago, Chile
Chile

Felix Javier Lopez-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Pablo SanMartín

University of Valladolid ( email )

8 C/Plaza de Santa Cruz
Valladolid, Valladolid 47002
Spain

Paolo Saona (Contact Author)

Saint Louis University - Madrid Campus ( email )

Avidena del Valle, 34 y 28
Madrid, 28003
Spain
0034 915 545858 (Phone)
0034 915 546202 (Fax)

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