Moderating Effect of Economic Instability in the Relationship between Concentration of Control and Market Value: Empirical Evidence in Latin America

Brazilian Business Review, Forthcoming

30 Pages Posted: 15 May 2019

See all articles by Dante Viana Jr.

Dante Viana Jr.

ISCTE-IUL University Institute of Lisbon

Daniel Caixe

Centro Universitário Estácio de Ribeirão Preto

Vera Ponte

Universidade Federal do Ceará

Date Written: April 16, 2019

Abstract

This paper investigates the moderating effect of economic instability in the relationship between the concentration of control and market value of firms. For this, we build an unbalanced panel dataset composed of 341 Latin American companies from six countries: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. The results of the dynamic models, estimated using the systemic generalized method of moments, indicate, in general, that concentration of control only reduces the market value of firms in environments with high economic instability. Thus, this study provides empirical evidence that times of economic instability encourage controlling shareholders to act even more strongly in their own interests, which may result in the expropriation of the wealth of smaller shareholders.

Keywords: Concentration of Control, Market Value, Economic Instability

Suggested Citation

Viana Jr., Dante and Caixe, Daniel and Ponte, Vera, Moderating Effect of Economic Instability in the Relationship between Concentration of Control and Market Value: Empirical Evidence in Latin America (April 16, 2019). Brazilian Business Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3373232

Dante Viana Jr. (Contact Author)

ISCTE-IUL University Institute of Lisbon ( email )

Avenida Forcas Armadas
Lisbon, 1649-026
Portugal

Daniel Caixe

Centro Universitário Estácio de Ribeirão Preto ( email )

Ribeirão Preto
Brazil

Vera Ponte

Universidade Federal do Ceará ( email )

Av da Universidade 2486
Fortaleza, Ceará 60160080
Portugal

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