Hostname: page-component-7c8c6479df-5xszh Total loading time: 0 Render date: 2024-03-29T06:51:35.343Z Has data issue: false hasContentIssue false

Ownership Dynamics with Large Shareholders: An Empirical Analysis

Published online by Cambridge University Press:  01 May 2013

Marcelo Donelli
Affiliation:
mhdonell@uc.cl, Pontificia Universidad Católica de Chile, Escuela de Administración, Avenida Vicuña Mackenna 4860, Macul, Santiago, Chile
Borja Larrain
Affiliation:
borja.larrain@uc.cl, Pontificia Universidad Católica de Chile, Escuela de Administración and Finance UC, Avenida Vicuña Mackenna 4860, Macul, Santiago, Chile
I. Francisco Urzúa
Affiliation:
f.urzuainfante@uvt.nl, Tilburg University, Department of Finance, PO Box 90153, Tilburg, 5000 LE, Netherlands.

Abstract

We study the empirical determinants of corporate ownership dynamics using a unique, hand-collected 20-year data set on the ownership structure of Chilean companies. Controllers’ blockholdings are on average high and stable over time. Controllers still make changes to their holdings through issuance and block trades. In a typical year controllers’ blockholdings decrease (increase) by 5 percentage points or more in approximately 6% (7%) of firms. We find that the separation between controllers’ voting and cash-flow rights reduces the likelihood of ownership dilution. Dilution is preceded by high stock returns and predicts low stock returns in the future when done through issuance.

Type
Research Articles
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adams, R., and Ferreira, D.. “One Share-One Vote: The Empirical Evidence.” Review of Finance, 12 (2008), 5191.CrossRefGoogle Scholar
Almeida, H.; Park, S. Y.; Subrahmanyam, M.; and Wolfenzon, D.. “The Structure and Formation of Business Groups: Evidence from Korean Chaebols.” Journal of Financial Economics, 99 (2011), 447475.CrossRefGoogle Scholar
Almeida, H., and Wolfenzon, D.. “A Theory of Pyramidal Ownership and Family Business Groups.” Journal of Finance, 61 (2006), 26372681.CrossRefGoogle Scholar
Ang, A.; Hodrick, R.; Xing, Y.; and Zhang, X.. “The Cross-Section of Volatility and Expected Returns.” Journal of Finance, 61 (2006), 259299.CrossRefGoogle Scholar
Baker, M. P., and Wurgler, J. A.. “The Equity Share in New Issues and Aggregate Stock Returns.” Journal of Finance, 55 (2000), 22192257.CrossRefGoogle Scholar
Baker, M. P., and Wurgler, J. A.. “Market Timing and Capital Structure.” Journal of Finance, 57 (2002), 132.CrossRefGoogle Scholar
Barca, F., and Becht, M.. The Control of Corporate Europe. Oxford: Oxford University Press (2001).Google Scholar
Barclay, M., and Holderness, C.. “Private Benefits from Control of Public Corporations.” Journal of Financial Economics, 25 (1989), 371395.CrossRefGoogle Scholar
Barclay, M., and Holderness, C.. “Negotiated Block Trades and Corporate Control.” Journal of Finance, 46 (1991), 861878.CrossRefGoogle Scholar
Burkart, M.; Gromb, D.; and Panunzi, F.. “Large Shareholders, Monitoring, and the Value of the Firm.” Quarterly Journal of Economics, 112 (1997), 693728.CrossRefGoogle Scholar
Burkart, M.; Panunzi, F.; and Shleifer, A.. “Family Firms.” Journal of Finance, 58 (2003), 21672201.CrossRefGoogle Scholar
Claessens, S.; Djankov, S.; Fan, J.; and Lang, L.. “Disentangling the Incentive and Entrenchment Effects of Large Shareholdings.” Journal of Finance, 57 (2002), 27412772.CrossRefGoogle Scholar
Claessens, S.; Djankov, S.; and Lang, L.. “The Separation of Ownership and Control in East Asian Corporations.” Journal of Financial Economics, 58 (2000), 81112.CrossRefGoogle Scholar
DeMarzo, P., and Urosevic, B.. “Ownership Dynamics and Asset Pricing with a Large Shareholder.” Journal of Political Economy, 114 (2006), 774815.CrossRefGoogle Scholar
Djankov, S.; La Porta, R.; López-de-Silanes, F.; and Shleifer, A.. “The Law and Economics of Self-Dealing.” Journal of Financial Economics, 88 (2008), 430465.CrossRefGoogle Scholar
Faccio, M., and Lang, L.. “The Ultimate Ownership of Western European Corporations.” Journal of Financial Economics, 65 (2002), 365395.CrossRefGoogle Scholar
Fama, E., and French, K.. “The Cross-Section of Expected Stock Returns.” Journal of Finance, 47 (1992), 427465.Google Scholar
Fama, E., and French, K.. “Dissecting Anomalies.” Journal of Finance, 63 (2008), 16531678.CrossRefGoogle Scholar
Fama, E. F., and MacBeth, J. D.. “Risk, Return, and Equilibrium: Empirical Tests.” Journal of Political Economy, 81 (1973), 607636.CrossRefGoogle Scholar
Foley, F., and Greenwood, R.. “The Evolution of Corporate Ownership After IPO: The Impact of Investor Protection.” Review of Financial Studies, 23 (2010), 12311260.CrossRefGoogle Scholar
Franks, J.; Mayer, C.; Volpin, P.; and Wagner, H. F.. “The Life Cycle of Family Ownership: International Evidence.” Review of Financial Studies, 25 (2012), 16751712.CrossRefGoogle Scholar
Graham, J. R., and Harvey, C. R.. “The Theory and Practice of Corporate Finance: Evidence from the Field.” Journal of Financial Economics, 60 (2001), 187243.CrossRefGoogle Scholar
Helwege, J.; Pirinsky, C.; and Stulz, R. M.. “Why Do Firms Become Widely Held? An Analysis of the Dynamics of Corporate Ownership.” Journal of Finance, 62 (2007), 9951028.CrossRefGoogle Scholar
Henderson, B. J.; Jegadeesh, N.; and Weisbach, M. S.. “World Markets for Raising New Capital.” Journal of Financial Economics, 82 (2006), 63101.CrossRefGoogle Scholar
Holderness, C. G. “The Myth of Diffuse Ownership in the United States.” Review of Financial Studies, 22 (2009), 13771408.CrossRefGoogle Scholar
Jensen, M. “Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers.” American Economic Review, 76 (1986), 323329.Google Scholar
Jensen, M., and Meckling, W.. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics, 3 (1976), 305360.CrossRefGoogle Scholar
La Porta, R.; López-de-Silanes, F.; and Shleifer, A.. “Corporate Ownership Around the World.” Journal of Finance, 54 (1999), 471517.CrossRefGoogle Scholar
La Porta, R.; López-de-Silanes, F.; Shleifer, A.; and Vishny, R. W.. “Investor Protection and Corporate Valuation.” Journal of Finance, 57 (2002), 11471170.CrossRefGoogle Scholar
Lefort, F.Ownership Structure and Corporate Governance in Latin America.” Abante, 8 (2005),5584.Google Scholar
Lefort, F., and Walker, E.. “Ownership and Capital Structure of Chilean Conglomerates: Facts and Hypotheses for Governance.” Abante, 3 (2000), 327.Google Scholar
Lefort, F., and Walker, E.. “Do Markets Penalize Agency Conflicts Between Controlling and Minority Shareholders? Evidence from Chile.” The Developing Economies, 45 (2007), 283314.CrossRefGoogle Scholar
Leland, H., and Pyle, D. H.. “Informational Asymmetries, Financial Structure, and Financial Intermediation.” Journal of Finance, 32 (1977), 371387.CrossRefGoogle Scholar
Lin, C.; Ma, Y.; Malatesta, P.; and Xuan, Y.. “Ownership Structure and the Cost of Corporate Borrowing.” Journal of Financial Economics, 100 (2011), 123.CrossRefGoogle Scholar
Lin, C.; Ma, Y.; and Xuan, Y.. “Ownership Structure and Financial Constraints: Evidence froma Structural Estimation.” Journal of Financial Economics, 102 (2011), 416431.CrossRefGoogle Scholar
Lins, K. V.Equity Ownership and Firm Value in Emerging Markets.” Journal of Financial and Quantitative Analysis, 38 (2003), 159184.CrossRefGoogle Scholar
Loughran, T., and Ritter, J. R.. “The New Issues Puzzle.” Journal of Finance, 50 (1995), 2351.CrossRefGoogle Scholar
Majluf, N.; Paredes, R.; and Silva, F.. “Family Ties, Interlocking Directors and Performance of Business Groups in Emerging Countries: The Case of Chile.” Journal of Business Research, 59 (2006),315321.Google Scholar
Majluf, N., and Silva, F.. “Does Family Ownership Shape Performance Outcomes?Journal of Business Research, 61 (2008), 609614.Google Scholar
McLean, R. D.; Pontiff, J.; and Watanabe, A.. “Share Issuance and Cross-Sectional Returns: International Evidence.” Journal of Financial Economics, 94 (2009), 117.CrossRefGoogle Scholar
Morck, R.; Wolfenzon, D.; and Yeung, B.. “Corporate Governance, Economic Entrenchment, and Growth.” Journal of Economic Literature, 43 (2005), 655720.CrossRefGoogle Scholar
Pagano, M.; Panetta, F.; and Zingales, L.. “Why Do Companies Go Public? An Empirical Analysis.” Journal of Finance, 53 (1998), 2764.CrossRefGoogle Scholar
Pontiff, J., and Woodgate, A.. “Share Issuance and Cross-Sectional Returns.” Journal of Finance, 63 (2008), 921945.CrossRefGoogle Scholar
Shleifer, A., and Vishny, R. W.. “Large Shareholders and Corporate Control.” Journal of Political Economy, 94 (1986), 461488.CrossRefGoogle Scholar
Stulz, R. M. “Managerial Control of Voting Rights: Financing Policies and the Market for Corporate Control.” Journal of Financial Economics, 20 (1988), 2554.CrossRefGoogle Scholar
Urzúa, I.F. “Too Few Dividends? Groups’ Tunneling Through Chair and Board Compensation.” Journal of Corporate Finance, 15 (2009), 245256.CrossRefGoogle Scholar
Villalonga, B., and Amit, R.. “How Are U.S. Family Firms Controlled?Review of Financial Studies, 22 (2009), 30473091.CrossRefGoogle Scholar
Zingales, L. “Insider Ownership and the Decision to Go Public.” Review of Economic Studies,62 (1995), 425448.CrossRefGoogle Scholar
Supplementary material: PDF

Donelli supplementary Appendix

Donelli supplementary Appendix

Download Donelli supplementary Appendix(PDF)
PDF 51.7 KB