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Corporate Governance in Chile

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Author Info
Manuel R. Agosin
Ernesto Pastén H.

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Abstract

The purpose of this paper is to describe the main features of the Chilean corporate governance regime during the ‘90s and to evaluate how well it runs. According to the existing literature, Chile’s system can best be described as an “insider” one. Large groups organized in a pyramidal fashion typically control publicly traded companies. In spite of this, corporate governance discriminates moderately against small shareholders or outsiders (e.g. bondholders). Some of the reasons behind this are the monitoring role of some financial institutions, such as AFPs (pension fund managers), the insurance and banking regulation, and an active supervisory agency. However, since the onset of the 1997-98 world financial crisis, Chilean capital markets have been gloomy. Capital outflows from the region have not been the only cause, but also a number of large takeovers of domestic corporations by multinationals and some well publicized cases of rent extraction from minority parties are to blame. In an attempt to revive a flagging market, some vices in corporate practices have been corrected (partially) by the enacting of the so-called “Ley de OPA” (PTO law) in December 2000. This law is aimed at protecting of minority shareholders’ rights. The Chilean experience illustrates the importance of factors not usually considered in discussions on corporate governance for developing countries, such as regulated institutional investors and banking sector legislation.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 209.

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Date of creation: May 2003
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Handle: RePEc:chb:bcchwp:209

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  1. Fernando Lefort & Eduardo Walker, 2000. "Ownership And Capital Structure Of Chilean Conglomerates:Facts And Hypotheses For Governance," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 3(1), pages 3-27. [Downloadable!]
  2. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  1. Luis H. Gutiérrez & Carlos Pombo & Rodrigo Taborda, 2005. "Propiedad y control en empresas colombianas," RES Working Papers 3221, Inter-American Development Bank, Research Department. [Downloadable!]
  2. Fernando Lefort, 2003. "Gobierno Corporativo: ¿Qué es? y ¿Cómo andamos por casa?," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(120), pages 207-237. [Downloadable!]
  3. Luis H. Gutiérrez & Carlos Pombo & Rodrigo Taborda, 2005. "Ownership and Control in Colombian Corporations," RES Working Papers 3220, Inter-American Development Bank, Research Department. [Downloadable!]
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  4. Stephanou, Constantinos, 2005. "Supervision of financial conglomerates : the case of Chile," Policy Research Working Paper Series 3553, The World Bank. [Downloadable!]
  5. Dayoub, Mariam & Lasagabaster, Esperanza, 2008. "General trends in competition policy and investment regulation in mandatory defined contribution markets in Latin America," Policy Research Working Paper Series 4720, The World Bank. [Downloadable!]
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