OWNERSHIP STRUCTURE AND CORPORATE GOVERNANCE IN LATIN AMERICA

This paper provides an overview of corporate governance practices in Latin American countries, surveying the available empirical literature, reviewing the reports on the subject prepared by multinational organizations, and providing new data for ownership and control structures of companies in different Latin American economies. Like in other emerging economies corporate governance in Latin America is conditioned by the high level of ownership concentration and the profusion of industrial and financial conglomerates controlling several companies. This corporate structure generates an agency problem between controlling and minority shareholders, that is exacerbated when controlling shareholders hold a disproportionate amount of voting power in relation to their cash flow rights. New empirical evidence indicates that Latin American markets penalize excessive separation between control and cash flow rights held by controlling shareholders. In addition, legislation, regulations and the judiciary power in the region are less effective in promoting and enforcing good practices than in more developed markets. Legal reform has been recently introduced to improve minority shareholder protection and enforcement.