IDEAS home Printed from https://ideas.repec.org/p/col/000089/014074.html
   My bibliography  Save this paper

Stock liquidity and second blockholder as drivers of corporate value: Evidence from Latin America

Author

Listed:
  • Carlos Pombo
  • Rodrigo Taborda

Abstract

This paper examines the relationship between firm value and blockholders in Latin America. Econometric results for a comprehensive data set of more than 550 firms listed in the six largest stock markets of the region support a positive effect of variables measuring the existence, contestability, dispersion and identity of blockholder on performance (Tobin’s Q) only for highly liquid stocks. The identity of the second largest blockholder (family, foreign, financial or the State) emerges as critical for such effects. The study supports the voice and exit approach as a disciplinary mechanism on firm performance.

Suggested Citation

  • Carlos Pombo & Rodrigo Taborda, 2015. "Stock liquidity and second blockholder as drivers of corporate value: Evidence from Latin America," Documentos CEDE 14074, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:014074
    as

    Download full text from publisher

    File URL: https://repositorio.uniandes.edu.co/bitstream/handle/1992/8616/dcede2015-41.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bloch, Francis & Hege, Ulrich, 2003. "Multiple Shareholders and Control Contests," MPRA Paper 42286, University Library of Munich, Germany.
    2. Alex Edmans & Vivian W. Fang & Emanuel Zur, 2013. "The Effect of Liquidity on Governance," The Review of Financial Studies, Society for Financial Studies, vol. 26(6), pages 1443-1482.
    3. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, June.
    4. Larcker, David F. & Rusticus, Tjomme O., 2010. "On the use of instrumental variables in accounting research," Journal of Accounting and Economics, Elsevier, vol. 49(3), pages 186-205, April.
    5. Himmelberg, Charles P. & Hubbard, R. Glenn & Palia, Darius, 1999. "Understanding the determinants of managerial ownership and the link between ownership and performance," Journal of Financial Economics, Elsevier, vol. 53(3), pages 353-384, September.
    6. Marco Becht & Colin Mayer, 2002. "Corporate control in Europe," Revue d'économie politique, Dalloz, vol. 112(4), pages 471-498.
    7. Najah Attig & Sadok El Ghoul & Omrane Guedhami, 2009. "Do Multiple Large Shareholders Play A Corporate Governance Role? Evidence From East Asia," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 32(4), pages 395-422, December.
    8. López-de-Silanes, Florencio & Serra, Pablo & Gertler, Paul & Schargrodsky, Ernesto & Anuatti, Francisco & Galiani, Sebastián & Chong, Alberto E. & Pombo, Carlos & Sturzenegger, Federico & Torero, Máxi, 2005. "Privatization in Latin America: Myths and Reality," IDB Publications (Books), Inter-American Development Bank, number 348, November.
    9. Jeffrey Zwiebel, 1995. "Block Investment and Partial Benefits of Corporate Control," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(2), pages 161-185.
    10. Jose Guedes & Gilberto Loureiro, 2006. "Estimating the expropriation of minority shareholders: Results from a new empirical approach," The European Journal of Finance, Taylor & Francis Journals, vol. 12(5), pages 421-448.
    11. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    12. Alberto Chong & Florencio López-de-Silanes, 2005. "Privatization in Latin America : Myths and Reality," World Bank Publications, The World Bank, number 7461, September.
      • Florencio López-de-Silanes & Pablo Serra & Paul Gertler & Ernesto Schargrodsky & Francisco Anuatti & Sebastián Galiani & Alberto E. Chong & Carlos Pombo & Federico Sturzenegger & Máximo Torero & Carlo, 2005. "Privatization in Latin America: Myths and Reality," IDB Publications (Books), Inter-American Development Bank, number 59618 edited by Florencio López-de-Silanes & Alberto E. Chong, February.
    13. Alex Edmans, 2014. "Blockholders and Corporate Governance," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 23-50, December.
    14. Roberts, Michael R. & Whited, Toni M., 2013. "Endogeneity in Empirical Corporate Finance1," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 493-572, Elsevier.
    15. Nadarajah, Sivathaasan & Ali, Searat & Liu, Benjamin & Huang, Allen, 2018. "Stock liquidity, corporate governance and leverage: New panel evidence," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 216-234.
    16. Robert W. McGee (ed.), 2009. "Corporate Governance in Developing Economies," Springer Books, Springer, number 978-0-387-84833-4, December.
    17. Fang, Vivian W. & Noe, Thomas H. & Tice, Sheri, 2009. "Stock market liquidity and firm value," Journal of Financial Economics, Elsevier, vol. 94(1), pages 150-169, October.
    18. Chung, Kee H. & Elder, John & Kim, Jang-Chul, 2010. "Corporate Governance and Liquidity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(2), pages 265-291, April.
    19. Luc Laeven & Ross Levine, 2008. "Complex Ownership Structures and Corporate Valuations," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 579-604, April.
    20. Aggarwal, Reena & Erel, Isil & Ferreira, Miguel & Matos, Pedro, 2011. "Does governance travel around the world? Evidence from institutional investors," Journal of Financial Economics, Elsevier, vol. 100(1), pages 154-181, April.
    21. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    22. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 11855.
    23. Pombo, Carlos & De la hoz, María Camila, 2015. "Institutional Investors and Firm Valuation: Evidence from Latin America," Galeras. Working Papers Series 040, Universidad de Los Andes. Facultad de Administración. School of Management.
    24. Cueto, Diego C., 2013. "Substitutability and complementarity of corporate governance mechanisms in Latin America," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 310-325.
    25. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2013. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, volume 2, number 2-b.
    26. Belén Villalonga & Raphael Amit, 2010. "Family Control of Firms and Industries," Financial Management, Financial Management Association International, vol. 39(3), pages 863-904, September.
    27. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2013. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, volume 2, number 2-a.
    28. Maury, Benjamin & Pajuste, Anete, 2005. "Multiple large shareholders and firm value," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1813-1834, July.
    29. Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
    30. Barca, Fabrizio & Becht, Marco (ed.), 2001. "The Control of Corporate Europe," OUP Catalogue, Oxford University Press, number 9780199247424.
    31. De-la-Hoz, Maria Camila & Pombo, Carlos, 2016. "Institutional investor heterogeneity and firm valuation: Evidence from Latin America," Emerging Markets Review, Elsevier, vol. 26(C), pages 197-221.
    32. Ali, Searat & Liu, Benjamin & Su, Jen Je, 2017. "Corporate governance and stock liquidity dimensions: Panel evidence from pure order-driven Australian market," International Review of Economics & Finance, Elsevier, vol. 50(C), pages 275-304.
    33. Mauricio Jara‐Bertin & Félix J. López‐Iturriaga & Óscar López‐de‐Foronda, 2008. "The Contest to the Control in European Family Firms: How Other Shareholders Affect Firm Value," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(3), pages 146-159, May.
    34. Gutiérrez, Luis H. & Pombo, Carlos, 2009. "Corporate ownership and control contestability in emerging markets: The case of Colombia," Journal of Economics and Business, Elsevier, vol. 61(2), pages 112-139.
    35. repec:bla:jfinan:v:53:y:1998:i:1:p:99-129 is not listed on IDEAS
    36. Peter Roosenboom & Frederik P. Schlingemann & Manuel Vasconcelos, 2014. "Does Stock Liquidity Affect Incentives to Monitor? Evidence from Corporate Takeovers," The Review of Financial Studies, Society for Financial Studies, vol. 27(8), pages 2392-2433.
    37. Falkenstein, Eric G, 1996. "Preferences for Stock Characteristics as Revealed by Mutual Fund Portfolio Holdings," Journal of Finance, American Finance Association, vol. 51(1), pages 111-135, March.
    38. Konijn, Sander J.J. & Kräussl, Roman & Lucas, Andre, 2011. "Blockholder dispersion and firm value," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1330-1339.
    39. Alex Edmans & Gustavo Manso, 2011. "Governance Through Trading and Intervention: A Theory of Multiple Blockholders," The Review of Financial Studies, Society for Financial Studies, vol. 24(7), pages 2395-2428.
    40. Robert W. McGee, 2009. "Corporate Governance in Developing Economies," Springer Books, in: Robert W. McGee (ed.), Corporate Governance in Developing Economies, chapter 0, pages 3-22, Springer.
    41. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
    42. Ferreira, Miguel A. & Matos, Pedro, 2008. "The colors of investors' money: The role of institutional investors around the world," Journal of Financial Economics, Elsevier, vol. 88(3), pages 499-533, June.
    43. Dasgupta, Amil & Piacentino, Giorgia, 2015. "The Wall Street walk when blockholders compete for flows," LSE Research Online Documents on Economics 63144, London School of Economics and Political Science, LSE Library.
    44. Clifford G. Holderness, 2009. "The Myth of Diffuse Ownership in the United States," The Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1377-1408, April.
    45. Amil Dasgupta & Giorgia Piacentino, 2015. "The Wall Street Walk when Blockholders Compete for Flows," Journal of Finance, American Finance Association, vol. 70(6), pages 2853-2896, December.
    46. Guilhem Bascle, 2008. "Controlling for endogeneity with instrumental variables in strategic management research," Post-Print hal-00576795, HAL.
    47. repec:bla:jfinan:v:53:y:1998:i:1:p:65-98 is not listed on IDEAS
    48. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 28241.
    49. repec:idb:brikps:59618 is not listed on IDEAS
    50. Marco Becht & Fabrizio Barca, 2001. "The control of corporate Europe," ULB Institutional Repository 2013/13302, ULB -- Universite Libre de Bruxelles.
    51. World Bank, 2013. "World Development Indicators 2013," World Bank Publications - Books, The World Bank Group, number 13191.
    52. Armo Gomes & Walter Novaes, 2001. "Sharing of Control as a Corporate Governance Mechanism," Penn CARESS Working Papers 3756d78204ca49d92aaf1c17c, Penn Economics Department.
    53. Richard Williams, 2012. "Using the margins command to estimate and interpret adjusted predictions and marginal effects," Stata Journal, StataCorp LP, vol. 12(2), pages 308-331, June.
    54. Marco Becht, 2001. "Beneficial ownership in the United States," ULB Institutional Repository 2013/13336, ULB -- Universite Libre de Bruxelles.
    55. Park, Yun W. & Selvili, Zekiye & Song, Moon H., 2008. "Large outside blockholders as monitors: Evidence from partial acquisitions," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 529-545, October.
    56. Leech, Dennis, 2002. "Designing the Voting System for the Council of the European Union," Public Choice, Springer, vol. 113(3-4), pages 437-464, December.
    57. Bernard S. Black & Hasung Jang & Woochan Kim, 2006. "Does Corporate Governance Predict Firms' Market Values? Evidence from Korea," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(2), pages 366-413, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristian Pinto-Gutiérrez & Carlos Pombo & Jairo Villamil-Díaz, 2018. "Board Capital Diversity and Firm Value: Evidence from Latin-America," Documentos CEDE 16972, Universidad de los Andes, Facultad de Economía, CEDE.
    2. Pérez-Soba, Inés & Martínez-Cañete, Ana R. & Márquez–de-la-Cruz, Elena, 2021. "Private benefits from control block trades in the Spanish stock exchange," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
    3. Carlos Pombo & Cristian Pinto-Gutierrez & Mauricio Jara-Betín, 2022. "Multiple large shareholder coalitions, institutional ownership and investment decisions: Evidence from cross-border deals in Latin America," Documentos CEDE 20333, Universidad de los Andes, Facultad de Economía, CEDE.
    4. Alvarez, Roberto & Jara, Mauricio & Pombo, Carlos, 2018. "Do institutional blockholders influence corporate investment? Evidence from emerging markets," Journal of Corporate Finance, Elsevier, vol. 53(C), pages 38-64.
    5. Chang, Chong-Chuo, 2018. "Cash conversion cycle and corporate performance: Global evidence," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 568-581.
    6. French, Joseph J. & Taborda, Rodrigo, 2018. "Disentangling the relationship between liquidity and returns in Latin America," Global Finance Journal, Elsevier, vol. 36(C), pages 23-40.
    7. Suman, Samridhi & Singh, Shveta, 2022. "The Role of Multiple Large Shareholders in Dividend Payouts: Evidence from India," American Business Review, Pompea College of Business, University of New Haven, vol. 25(1), pages 120-151, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. De-la-Hoz, Maria Camila & Pombo, Carlos, 2016. "Institutional investor heterogeneity and firm valuation: Evidence from Latin America," Emerging Markets Review, Elsevier, vol. 26(C), pages 197-221.
    2. Edmans, Alex & Holderness, Clifford, 2016. "Blockholders: A Survey of Theory and Evidence," CEPR Discussion Papers 11442, C.E.P.R. Discussion Papers.
    3. Pombo, Carlos & De la hoz, María Camila, 2015. "Institutional Investors and Firm Valuation: Evidence from Latin America," Galeras. Working Papers Series 040, Universidad de Los Andes. Facultad de Administración. School of Management.
    4. Ducassy, Isabelle & Guyot, Alexis, 2017. "Complex ownership structures, corporate governance and firm performance: The French context," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 291-306.
    5. Sabri Boubaker & Pascal Nguyen & Wael Rouatbi, 2016. "Multiple Large Shareholders and Corporate Risk†taking: Evidence from French Family Firms," European Financial Management, European Financial Management Association, vol. 22(4), pages 697-745, September.
    6. Jiang, Fuxiu & Cai, Wenjing & Wang, Xue & Zhu, Bing, 2018. "Multiple large shareholders and corporate investment: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 66-83.
    7. Rossi, Fabrizio & Barth, James R. & Cebula, Richard J., 2018. "Do shareholder coalitions affect agency costs? Evidence from Italian-listed companies," Research in International Business and Finance, Elsevier, vol. 46(C), pages 181-200.
    8. Alvarez, Roberto & Jara, Mauricio & Pombo, Carlos, 2018. "Do institutional blockholders influence corporate investment? Evidence from emerging markets," Journal of Corporate Finance, Elsevier, vol. 53(C), pages 38-64.
    9. Alex Edmans, 2014. "Blockholders and Corporate Governance," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 23-50, December.
    10. Wang, Xiaoqiong & Zhen, Hongxian & Zhu, Feifei, 2023. "Voting with their feet: Controlling shareholders' share pledging and other major shareholders' strategic response," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    11. Roberto Álvarez & Mauricio Jara-Bertín & Carlos Pombo, 2016. "Do institutional investors unbind firm financial constraints? Evidence from emerging markets," Documentos CEDE 15114, Universidad de los Andes, Facultad de Economía, CEDE.
    12. Gutiérrez, Luis H. & Pombo, Carlos, 2009. "Corporate ownership and control contestability in emerging markets: The case of Colombia," Journal of Economics and Business, Elsevier, vol. 61(2), pages 112-139.
    13. Claessens, Stijn & Yurtoglu, B. Burcin, 2013. "Corporate governance in emerging markets: A survey," Emerging Markets Review, Elsevier, vol. 15(C), pages 1-33.
    14. Carlos Pombo & Cristian Pinto-Gutierrez & Mauricio Jara-Betín, 2022. "Multiple large shareholder coalitions, institutional ownership and investment decisions: Evidence from cross-border deals in Latin America," Documentos CEDE 20333, Universidad de los Andes, Facultad de Economía, CEDE.
    15. Cheng, Minying & Lin, Bingxuan & Wei, Minghai, 2013. "How does the relationship between multiple large shareholders affect corporate valuations? Evidence from China," Journal of Economics and Business, Elsevier, vol. 70(C), pages 43-70.
    16. Luis H. Gutiérrez & Carlos Pombo, 2005. "Corporate Valuation and Governance: Evidence from Colombia," Research Department Publications 3216, Inter-American Development Bank, Research Department.
    17. Sabri Boubaker & Riadh Manita & Wael Rouatbi, 2021. "Large shareholders, control contestability and firm productive efficiency," Annals of Operations Research, Springer, vol. 296(1), pages 591-614, January.
    18. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    19. Amin, Qazi Awais & Cumming, Douglas, 2021. "Blockholders and real earnings management-the emerging markets context," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    20. Xibo Zhao & Dan Yang & Zhengguang Li & Lynda Song, 2021. "Multiple large shareholders and corporate fraud: evidence from China," Frontiers of Business Research in China, Springer, vol. 15(1), pages 1-21, December.

    More about this item

    Keywords

    Blockholders; firm value; corporate governance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000089:014074. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Universidad De Los Andes-Cede (email available below). General contact details of provider: https://edirc.repec.org/data/ceandco.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.