Ownership structure and minority rights: A Latin American view

Abstract

Latin America provides a unique scenario to expand current research on corporate governance. First, agency problems in the region may stem from the misalignment of goals and objectives between the majority and minority shareholders rather than from the diverse interests of management and owners. Second, corporate governance mechanisms available to mitigate agency problems may be inefficient or non-existent. Third, the lack of institutional protection for minority shareholders’ rights may enhance the potential for agency problems, especially for the expropriation of minority shareholders’ rights. Empirical analysis of data from 97 companies from Chile, Brazil, and Mexico from 2000 through 2002 indicates that a higher degree of family ownership increases the potential for expropriation of minority shareholders’ rights. Furthermore, companies affiliated with grupos appear to be less likely to expropriate their shareholders’ rights, possibly signaling changes in market environments in Latin America.