Capital concentration and value of the Brazilian companies.

Author:da Silva, Antonio Carlos

    The shareholding composition and the value of the company have been theme of scientific investigation for countless researchers. Indicating the beginning of this debate, Berle & Means (1932) presented a model in which the structure of pulverized ownership of shares would be associated with a greater value for the company. However, later studies demonstrated that, nowadays, the diffuse ownership is not seen in most of the countries researched. La Porta, de-Silanes and Shleifer (1999), for example, studied the ownership structure of big corporations in wealth-considered countries and they observed that, with the exception of those in which there was legal protection to the minority shareholders, the control was concentrated in the hands of the families and the State.

    In Brazil, Assaf Neto, Lima & Araujo (2008) collected data of the capital market from 2000 to 2006 in order to evidence the concentration degree. The results obtained showed that the ownership is under control of a small number of shareholders, what, according to the authors, can jeopardize the development of this market in the country. Moreover, the Brazilian laws are based on the Direito Civil Frances (French Civil Law). According to La Porta et al (1998), this system offers deficient protection to investors not only concerning the laws themselves, but also the coercion of the rights.

    In a context in which the interests of the controllers and investors are not balanced, there can be wealth expropriation of the minorities. The situation gets worse when there is separation between vote rights and rights on the cashflow, what makes it impossible to retain the control of the entity without having the majority of its shares. Therefore, the majoritary shareholder can use his power to interfere in the company's operations seeking private benefits, causing the investors to assume a parcel of the costs.

    Due to the characteristics of the Brazilian money market, the agency problems and their implications in the company's value as well as the evidenciations of previous works, the matter-question of this research can be formulate like this: Is there a significative correlation between the capital concentration and the value of the Brazilian companies?


    With initial distinction to the work of Berle & Means (1932), the question of the separation between ownership and control was brought into discussion, considering it as a crucial issue in the economic theory for creating opportunities so that the managers follow private interests which are different from the ones of the owners of the company.

    Later studies--such as Thomsen & Pedersen (2000)--brought evidences that the ownership concentration in the hands of business managers, when kept at relatively low levels, is beneficial for its economic performance because it promotes a tendency to the convergence of managers and shareholders' interests. Nevertheless, it is argued that there is a limit point in which the level of managerial ownership leads to the entrenchment, that is, the managers start to seek private benefits in detriment to the investors' interests, and thus, they spend energy in activities which do not maximize the company's value.

    In Brazil, Okimura (2003) investigated the existence of a relation between ownership structure and control and value and performance variables in the Brazilian open companies from 1998 to 2002. The results suggest the concentration of votes in the hands of one or more majoritary shareholders causes not only costs but also advantages for the company, which suggests the existence of a limit point where the trade --off leads to the value maximization (OKIMURA, 2003, p. 76).

    Demsetz & Lehn (1985) argue that the ownership structure is sistematically altered consistently with the maximization of the company's value. Also according to the authors, the ownership degree allocated in the hands of the managers is also determined by the company's risk, so that, when facing greater risks, it is necessary that the managers withhold a certain amount of shares to decrease the moral deviation frequency. Demsetz & Villalonga (2001) assert that the degree of concentration varies among the companies because the circunstances each one of them meet is different mainly concerning the characteristics of the area in which they are in and the regulation they face.

    La Porta, de-Silanes &amp...

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