LOOKING BACK AT THE CONTROVERSY: UNEXPECTED WEALTH EFFECTS OF A TRANSITORY CLAUSE

This paper analyzes the effect of adopting an optional provision contained in a broader regulatory change in Chile (tender offer law or Ley de OPAs). Although the motivation for the Ley de OPAs was to strengthen corporate governance mechanisms in Chile, the availability of this optional provision (transitory article ten) for the controlling shareholders was believed to work the opposite way. In this paper we find no evidence indicating that the decision to adopt this transitory article significantly harmed minority shareholders. Several robustness checks confirm this. However, the evidence indicates that these firms realized on average significantly positive abnormal returns in the weeks that followed the decision. This abnormal return is significant only for firms with less concentrated ownership. We conjecture that this positive reaction is related to the decision to adopt the transitory article.