Corporate governance and expropriation of minority shareholders' rights: Evidence from Latin America

Authors

Marisela Santiago-Castro, University of Texas-Pan American

Date of Award

5-2005

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Business Administration

First Advisor

Dr. Cynthia J. Brown

Second Advisor

Dr. H. Young Baek

Third Advisor

Dr. Dave Jackson

Abstract

The dissertation empirically examines whether the internal corporate governance mechanisms of the firms represented in Latin American equity markets lead to the expropriation of minority shareholders' rights; and whether such expropriation leads to economic underperformance. Specifically, the dissertation answers the following: Is there a relationship between the board of director's characteristics and the expropriation of minority shareholders rights in Latin American firms? Is there a relationship between the ownership structure of Latin American firms and the expropriation of minority shareholders rights? Moreover, does the expropriation of minority shareholders rights lead to economic underperformance among Latin American firms?

Several hypotheses were developed to empirically relate the internal corporate governance mechanisms with the expropriation of minority shareholders' rights, and the latter with performance. The hypotheses were tested using a sample of 97 companies from Brazil, Chile, and Mexico, for a three-year period (2000–2002).

Univariate analyses were employed to examine the differences in means between the three countries for several variables of interest. In addition, multivariate tests, including panel analysis, were utilized to test the specific hypotheses.

The results suggest that there is a relationship between the characteristics of a firm's board of directors and the expropriation of minority shareholders' rights. In particular, there is a positive association between board size and CEO ownership and the expropriation. By contrast, there is a negative relationship between the number of interlocking directorates and grupo affiliation with the expropriation of minority shareholders' rights. The findings also support a positive relation between family ownership and expropriation of minority shareholders' rights. Finally, this dissertation provides evidence that expropriation of minority shareholders' rights lead to under performance in emerging economies.

The contribution of the dissertation is twofold: (a) it fills a gap in the current corporate governance literature investigating an unexplored geographic area: Latin America; and (b) it is the first attempt to empirically measure the degree of expropriation of minority shareholders' rights, and its relationship with corporate governance mechanisms and performance.

Comments

Copyright 2005 Marisela Santiago-Castro. All Rights Reserved.

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Granting Institution

University of Texas-Pan American