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Ownership Concentration and Economic and Financial Performance in Latin…

- - - - Srour(2005) points out that the lack of transparency within the organization and misconduct against the minority shareholders have been identified as soutces for poor performance in stock market. thus causing serious consequences for the efficiency of economy.
        Bastos, Nakamura and Basso (2009) insist that the determinants of capital structure are not only restricted to specific factors of the companies. They include level of tangibility, size, profitability, risk, growth opportunities, level of income tax and tax benefits.
        
        Terra(2007) states the country-specific factors are important determinants of capital structure in emerging markets. These specific factors include institutional infrastructure, legal and accounting practices , financial infrastructure and macroeconomic environment.
        Céspedes, Gonzales and Molina (2009) warn, Latin American Companies showing high growth opportunities tend to have higher leverage, thus indicating that firms with high ownership concentration do not seek capital funding to avoid losing control of the company.
        
        this study seeks to answer the following question: which is the relationship of ownership concentration in the economic and economic and financial performance of Latin American companies? The main objective of the research is to examine the relationship of ownership concentration in the economic and financial performance in Latin American companies.
        For the execution of this study was used a sample of Latin American publicly traded firms possessing Latin American publicly traded firms possessing ADRs a factor involving more rigid instruments of protection of minority shareholder. Also, the period under analysis comprises five years, from 2008 to 2012 due to the availability that supported the study
- - - - Basto´s and Nakamura's (2009) study has investigated the determinants of capital structure for a sample of 297 companies from various sectors in Brazil, Mexico and Chile between 2001 and 2006. It was evident that factors such as current liquidity, profitability, market to book value and size have showed the most significant results for capital structure of the companies in three countries.
        The four theoretical perspectives analyzed are: Trade off, Information asymetry, pecking order and agency theory.
        
        Researches conducted by Cespedes and Gonzalez (2009) have evaluated the determinants of capital structure within Latin American Companies using a sample of seven countries. They found evidence that the companies in the region show levels of debts like North American firms. The results depict a positive relationship between leverage and ownership concentration, when the loss of control becomes a problem.
  - - - Santos, Pimenta junior and Cicconi (2009) believe that the use of debt generates two opposite effects. The positive effects of debt result from tax benefit by deducting the payment of corporate imncome tax to debt interest, The negative effects come from bankruptcy costs.
        
        Cespedes, Gonzales and Molina (2009) point out that attributes such as size, growth opportunities , asset, tangibility, profitability and taxes are statistically and economically important to explain leverage in Latin American Companies. The companies have high growth opportunities and those that are less profitable tend to have higher debt.
        
        Correa, Basso and Nakamura (2013) the capital structure has been the subject of several studies over the past decades. The diversity of results leads to the conclusion that it is an unresolved issue.
- - - - Within the universe of public traded companies in Latin America, were sought those with ADRs, regardless of the emission level and sector of activity, whose negotiations are active on the NYSE, AMEX, NASDAQ.
        
        The companies with these characteristic was restricted to following countries: Argentina, Brazil, Colombia, Chile, Mexico, Peru and Venezuela because they represent the most part of Latin American Firms. The sample was composed of 78 companies within the population of companies used in the research.
    - - To achieve the goal of analyzing the relationship was used the method of canonical correlation that by Spiegel(1993) defines correlation as the degree of relationship among the variables, determining how a linear equation.
        
        Since the purpose of the canonical correlation is to establish relationship between two sets of variables, this technique is used to assist the choice of statistical techniques to be used and to determine the variables that are more appropriate to the study
- - - - At second, shows the coefficients for canonical variables of ownership structure group and economic and financial performance group for all Latin American Countries studied. The result show a tendency that the highest total indebtedness and the greatest tangibility are determinants of the lowest return on assets and higher return on sales.
        
        At third, show the canonical correlation for each Latin American Country. The result was that the correlation with higher significance for Mexico, followed by Chile, Argentina and Brazil.
        Venezuela don´t have significance lower than % and Colombia and peru due to few observation, did not show any results.
        
        At fourth, show the coefficients for canonical of ownership structure group and economic and financial group performance group of Mexico. The results the tendency that a higher collateral value of assets and greater tax benefits than debt are determinants of lower return on equity of the company.
        
        The companies analyzed in this study need to adapt themselves to higher levels and insert more rigid instruments of protection of minority shareholders, because the possess issuances of ADRs with trade active shares on New York Stock Exchange, American Stock Exchange and on National Association of Securities Dealers Automated Quotation.
        
        The finding reveal that the capital structure decisions are tied directly to the results of organization, reflecting on the economic and financial performance.