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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.

Suggested Citation

  • Ruiz-Porras, Antonio & Lopez-Mateo, Celina, 2010. "The separation of ownership and control and investment decisions in Mexican manufacturing firms," MPRA Paper 25237, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25237
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    References listed on IDEAS

    as
    1. Franklin Allen, 2005. "Corporate Governance in Emerging Economies," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(2), pages 164-177, Summer.
    2. 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.
    3. Stijn Claessens, 2006. "Corporate Governance and Development," The World Bank Research Observer, World Bank, vol. 21(1), pages 91-122.
    4. Brian Cheffins and Steven Bank, 2009. "Is Berle and Means Really a Myth?," Business History Review, Harvard Business School, vol. 83(3), pages 443-474, September.
    5. 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.
    6. 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.
    7. McKnight, Phillip J. & Weir, Charlie, 2009. "Agency costs, corporate governance mechanisms and ownership structure in large UK publicly quoted companies: A panel data analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 139-158, May.
    8. Cheffins, Brian & Bank, Steven, 2009. "Is Berle and Means Really a Myth?," Business History Review, Cambridge University Press, vol. 83(3), pages 443-474, October.
    9. 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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    More about this item

    Keywords

    Ownership; Control; Investment; Mexico; Manufacturing;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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