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Ownership And Capital Structure Of Chilean Conglomerates:Facts And Hypotheses For Governance

  • FERNANDO LEFORT

    ()

    (Escuela de Administración, Pontificia Universidad Católica de Chile)

  • EDUARDO WALKER

    ()

    (Escuela de Administración, Pontificia Universidad Católica de Chile)

In this paper we provide an accurate descriptive analysis of consolidated ownership and capital structures in Chilean conglomerates, emphasizing the implications of these structures for corporate governance. We avoid double counting investments made through pyramid schemes, and consider the universe of non-financial firms registered at the Superintendencia de Seguros y Valores (SVS). We find that economic groups are the predominant form of corporate structure in Chile, and that the most common way of separating control from cash-flow rights in Chilean conglomerates is through pyramid schemes. These schemes have proven to be successful in raising external funding. Controllers of Chilean conglomerates rely in a relatively small number of people in order to conduct business, and these people participate exclusively as board members of corporations affiliated to their group. However, controllers of Chilean conglomerates hold more equity than strictly needed for control, suggesting that cash-flow benefits associated to subsidiaries are relatively large. Finally, pension funds and ADRs constitute a significant minority shareholder in Chilean groups.

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Article provided by Escuela de Administracion. Pontificia Universidad Católica de Chile. in its journal ABANTE.

Volume (Year): 3 (2000)
Issue (Month): 1 ()
Pages: 3-27

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Handle: RePEc:pch:abante:v:3:y:2000:i:1:p:3-27
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  1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
  2. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  3. repec:cup:cbooks:9780521781640 is not listed on IDEAS
  4. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
  5. Stijn Claessens & Simeon Djankov & Leora Klapper1, 2000. "The Role And Functioning Of Business Groups In East Asia And Chile," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 3(1), pages 91 -107.
  6. Jorge Tarziján M, 1999. "Internal Capital Markets And Multimarket Contact As Explanations For Conglomerates In Emerging Markets," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 2(1), pages 3-22.
  7. Fernando Lefort & Eduardo Walker, 2000. "The Effects Of Economic And Political Shocks On Corporate Governance Systems In Chile," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 2(2), pages 183-206.
  8. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, 04.
  9. Tarun Khanna & Krishna Palepu, 1999. "Policy Shocks, Market Intermediaries, and Corporate Strategy: The Evolution of Business Groups in Chile and India," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 271-310, 06.
  10. David S. Scharfstein, 1998. "The Dark Side of Internal Capital Markets II: Evidence from Diversified Conglomerates," NBER Working Papers 6352, National Bureau of Economic Research, Inc.
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