Determinants of ownership concentration in the Chilean stock market

Abstract

This paper analyses econometrically the determinants of ownership concentration in the Chilean stock market, paying particular attention to the effects of the Public Tender Offer Act (Ley de Ofertas Publicas de Adquisicion de Acciones). Although the Public Tender Offer Act achieves its central purpose, the tender mechanism increases the concentration of ownership, mainly because of the residual tender offer obligation for which the Act provides. In addition, the study has found significant opposite responses between the controlling shareholder and the next two largest shareholders, which should sound a warning for international comparisons based on a common measure of ownership concentration that do not take account of the ownership structures characterizing Latin American markets. These aspects must be considered if the regulatory goals aimed at by minority shareholder protection bills are to be achieved.