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The Impact of Chilean Publicly Traded Firms' Ownership Structures On Performance and Disclosure Levels
Unformatted Document Text:  1 The Impact of Chilean Publicly Traded Firms’ Ownership Structures On Performance and Disclosure Levels INTRODUCTION Lins (2003) investigates the implications of different ownership structures for firm valuations and corporate governance in emerging markets. She finds that in emerging markets, outside block stockholders such as institutional investors play an important role in restraining managerial agency costs by acting as a substitute for missing governance mechanisms. In emerging markets, publicly traded firms are related in one way or another to economic groups that closely control them by holding a large portion of their shares. In such instances, agency problems between controlling and minority shareholders are developed (Lefort and Walker, 2007; Khanna and Palepu, 1999). This study contributes to the growing literature on corporate governance by analyzing recent developments in the ownership structures of publicly traded firms in Chile, one of the most important emerging markets in Latin America. Specifically, the study measures the impact of institutional holdings and insiders’ ownership on firm performance and disclosure levels. In Chile, institutional ownership levels have increased substantially as a result of the privatization of the social security system. The study of corporate governance developments in Chile provides a unique case to understand whether the efforts of emerging markets to improve transparency are working. In particular, in the last two decades Chile has introduced new legislations and market-based mechanisms to improve corporate governance. Since 1980, Chile has attempted to improve the participation of outside block shareholders by privatizing its social security system, and creating new regulated institutions. The Chilean legal system follows the tradition of French civil law, but the securities laws and corporate laws were reformed in 1994 and 2000 to be more closely aligned with laws in the United States. The Organization for Economic Co-Operation and Development

Authors: Pizarro, Veronica., Curci, Roberto., Mahenthiran, Sakthi. and Cademartori, David.
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1 
The Impact of Chilean Publicly Traded Firms’ Ownership Structures  
On Performance and Disclosure Levels 
 
INTRODUCTION 
Lins (2003) investigates the implications of different ownership structures for firm 
valuations and corporate governance in emerging markets. She finds that in emerging markets, 
outside block stockholders such as institutional investors play an important role in restraining 
managerial agency costs by acting as a substitute for missing governance mechanisms. In 
emerging markets, publicly traded firms are related in one way or another to economic groups that 
closely control them by holding a large portion of their shares. In such instances, agency problems 
between controlling and minority shareholders are developed (Lefort and Walker, 2007; Khanna 
and Palepu, 1999). This study contributes to the growing literature on corporate governance by 
analyzing recent developments in the ownership structures of publicly traded firms in Chile, one 
of the most important emerging markets in Latin America. Specifically, the study measures the 
impact of institutional holdings and insiders’ ownership on firm performance and disclosure 
levels. In Chile, institutional ownership levels have increased substantially as a result of the 
privatization of the social security system.  
The study of corporate governance developments in Chile provides a unique case to 
understand whether the efforts of emerging markets to improve transparency are working. In 
particular, in the last two decades Chile has introduced new legislations and market-based 
mechanisms to improve corporate governance. Since 1980, Chile has attempted to improve the 
participation of outside block shareholders by privatizing its social security system, and creating 
new regulated institutions. The Chilean legal system follows the tradition of French civil law, but 
the securities laws and corporate laws were reformed in 1994 and 2000 to be more closely aligned 
with laws in the United States. The Organization for Economic Co-Operation and Development 


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