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

Author

Listed:
  • FERNANDO LEFORT

    () (Escuela de Administración, Pontificia Universidad Católica de Chile)

  • EDUARDO WALKER

    () (Escuela de Administración, Pontificia Universidad Católica de Chile)

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:pch:abante:v:3:y:2000:i:1:p:3-27
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    File URL: http://eacc10.puc.cl/files/ABT/Contenidos/Vol-3-N1/1%20Lefort%20Walker.pdf
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    References listed on IDEAS

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    1. repec:hrv:faseco:30728046 is not listed on IDEAS
    2. 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, April.
    3. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    4. 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.
    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. 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.
    7. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    8. 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, June.
    9. repec:hrv:faseco:30728041 is not listed on IDEAS
    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.
    11. 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.
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    More about this item

    Keywords

    Corporate Governance; Conglomerates; Capital Structure; Chile; Emerging Economies;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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