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The separation of ownership and control and investment decisions in Mexican manufacturing firms

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  • Ruiz-Porras, Antonio
  • Lopez-Mateo, Celina

Abstract

We study how the ownership and control structures may explain investment decisions of Mexican manufacturing firms. We study them with aggregate indexes and the assessment of several regression sets. We use measures of ownership, management and agency costs. The econometric analysis uses longitudinal census data for 182 industries. Our findings support the claim that agency costs, as a measure of the separation of management and control, and firms` size can explain investment decisions. Furthermore the estimations support the necessity to include investment opportunities and cash flow as control variables. The coefficients of all variables are mostly significant and positive.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25237.

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Date of creation: 20 Sep 2010
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Handle: RePEc:pra:mprapa:25237

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Keywords: Ownership; Control; Investment; Mexico; Manufacturing;

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  1. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu, 2007. "Corporate Governance and the Determinants of Investment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 598-626, December.
  2. Madden, Gerald P., 1982. "The separation of ownership from control and investment performance," Journal of Economics and Business, Elsevier, vol. 34(2), pages 149-152.
  3. Franklin Allen, 2005. "Corporate Governance in Emerging Economies," Oxford Review of Economic Policy, Oxford University Press, vol. 21(2), pages 164-177, Summer.
  4. Antonio Ruiz-Porras & William Henry Steinwascher Sacio, 2008. "Gobierno corporativo, diversificación estratégica y desempeño empresarial en México," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 2(1), pages 58-73.
  5. Stijn Claessens, 2006. "Corporate Governance and Development," World Bank Research Observer, World Bank Group, vol. 21(1), pages 91-122.
  6. Kadapakkam, Palani-Rajan & Kumar, P. C. & Riddick, Leigh A., 1998. "The impact of cash flows and firm size on investment: The international evidence," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 293-320, March.
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