Latin America general characteristics v France Civil Law

Latin America: general characteristics v France Civil Law • investors are less protected (La Porta et al. , 1997) • investors' expropriation risk is more severe (Chong et al. 2007) • lack of protection for minorities v Macroeconomic uncertainty, political factors • the cost of capital is higher • the level of financial development in the region is very low Highly concentrated ownership Companies: family business Typical situation: CEO is, or relates to, major shareholder

Brazil Conditions • Historical (ineffective privatization) • Macroeconomic, political Typical owners Families (business groups), Government, Institutional investors (esp. pension funds – 15% of all listed companies) Foreign investors Oman C. P. Corporate Governance in Development. The experiences of Brazil, Chile, India, and South Africa. OECD: 2003. 260 p.

Brazil Main shareholders of listed companies 53% of cases: family 18% of cases: foreign investors 8% of cases: government Additional statistics 77% of companies are controlled by one large shareholder Only 7% - without stockholder whose fraction more than 20% Up to 90% of trading in BOVESPA – preferred stocks Aldrighi, M. , Oliveira, A. (2007), The Influence of Ownership and Control Structures on the Firm Performance: Evidence from Brazil. SSRN Working Paper, p. 1– 18. Carvalhal-da-Silva A. L. Leal R. Corporate Governance and Value in Brazil and in Chile. Working paper. The Coppead Graduate School of Business at the Federal University of Rio de Janeiro. 2005.

Proxies for ownership structure Fractions Government Institutional Managerial • Ownership of CEO Alfaraih et al. , 2012 (Chen, Yu; 2012) • Insider ownership (Liang, 2009) Abdelsalam et al. , 2008 Ivashkovskaya, Stepanova (2010), Mollah et al. (2012),

Proxies Also: • Fraction of founder or family: Xia et al. (2008), Cueto (2009) • Fraction of foreign investors: Mollah et al. (2012); Farooque, Jai (2012); Zeitun (2009) • Fraction of other companies: Shahid (2003), • Fraction of minority: Farooque (2010), • Fraction of 2 nd major shareholder: Chung (1999) • Ownership concentration (HHI): Zeitun (2009), Cespedes et al. (2010) Dummy variables Ivashkovskaya, Stepanova (2010), Xia et al. (2009), Cueto (2009), Shahid (2003), Ivasaki (2008)

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