ANDQUANTITATIVE
ANALYSIS
JOURNAL
OF FINANCIAL
VOL.38, NO. 1, MARCH
2003
WA98195
UNIVERSITY
OF WASHINGTON,
COPYRIGHT
SEATTLE,
2003, SCHOOLOF BUSINESSADMINISTRATION,
EquityOwnershipand FirmValuein Emerging
Markets
KarlV.Lins*
Abstract
This paperinvestigateswhethermanagementstock ownershipand large non-management
blockholdershareownershipare relatedto firmvalue across a sample of 1433 firmsfrom
18 emerging markets. When a managementgroup's control rights exceed its cash flow
rights, I find that firm values are lower. I also find that large non-managementcontrol
rights blockholdings are positively relatedto firm value. Both of these effects are significantly more pronouncedin countrieswith low shareholderprotection. One interpretation
of these resultsis thatexternalshareholderprotectionmechanismsplay a role in restraining
managerialagency costs and that large non-managementblockholderscan act as a partial
substitutefor missing institutionalgovernancemechanisms.
I. Introduction
Recentresearchshows thatlargeblockholdersdominatethe ownershipstructures of firms not domiciled in the U.S. or a few other developed countries (Shleifer
and Vishny (1997), La Porta, Lopez-de-Silanes, Shleifer, and Vishny (LLSV)
(1998), La Porta,Lopez-de-Silanes,and Shleifer(1999), Claessens, Djankov,and
Lang (2000), andDenis andMcConnell(2003)). This researchsuggests thatsuch
concentratedownershipcoincides with a lack of investorprotectionbecause owners who are not protectedfrom controllerswill seek to protect themselves by
becoming controllers.When controlhas incrementalvalue beyond any cash flow
rights associatedwith equity ownership,shareholderswill seek to obtaincontrol
rights that exceed cash flow rights in a given firm. Aroundthe world, controlin
*finkvl@business.utah.edu,David Eccles School of Business, University of Utah, 1645 E. Campus CenterDrive, Salt Lake City, UT 84112. I thank Stijn Claessens, JenniferConrad,Amy Dittmar,
Robert Dittmar,Simeon Djankov,Mustafa Giiltekin, Mark Lang, Mike Lemmon, John McConnell
(the editor), Henri Servaes, Anil Shivdasani,Marc Zenner, and Ingyu Chiou (discussant) and other
participantsat the 1999 EuropeanFinance Association Conferencefor helpful remarks.I also thank
seminarparticipantsat Arizona State University,Emory University, SouthernMethodist University,
Universityof Georgia,Universityof NorthCarolinaat ChapelHill, Universityof Notre Dame, University of Pittsburgh,Universityof Utah, Universityof Virginia,and VanderbiltUniversity.I thankMara
Faccio (the referee) for many detailed commentsand for suggesting additionalregressionmodels that
have improvedthe paper substantially. I thank Stijn Claessens and Simeon Djankov for providing
access to the stock markethandbooksused in the WorldBank East Asia ownershipstudies. I am also
grateful to Stijn Claessens, LarryLang, and Mara Faccio for providing the ownershipdata used in
their studies of East Asia and WesternEurope.
159
160
Journalof Financialand QuantitativeAnalysis
excess of proportionalownershipis usually achievedthroughpyramidstructures
in which one firmis controlledby anotherfirm,which may itself be controlledby
some otherentity.
The managementgroup(andits family members)is usuallythe largestblockholderof a firmat the top of the pyramidand thereis significantoverlapbetween
the top firm'smanagementgroupand the managersof each firmdown the line in
the pyramid. Thus, the controllingmanagersat the top of a pyramidare generally able to exercise effective control of all the firms in the pyramid,while they
bear relatively less of the cash flow consequences of exercising their control in
each firmdown the line. Finally,irrespectiveof pyramiding,managersof a given
firm sometimes issue and own shareswith superiorvoting rights to achieve control rightsthatexceed theircash flow rightsin the firm (Zingales (1994), Nenova
(2003)). Takentogether,the net result is that a great numberof firms aroundthe
worldhave managerswho possess controlrightsthatexceed theircash flow rights
in the firm, which, fundamentally,gives rise to potentially extreme managerial
agency problems.
The extent to which managerialagency problemsaffect firm value is likely
to dependon severalfactors.If thereare cash flow incentivesthatalign managers'
interestswith those of outside shareholders,this should raise firm values. Alternatively,if a managementgroupis insulatedfrom outside shareholderdemands,
a situationoften referredto as managerialentrenchment,managersmight choose
to use theircontrolto extractcorporateresources;this consumption(or expected
consumption)of the privatebenefits of control should reduce firm values. When
managershave control in excess of their proportionalownership,the consumption of privatecontrol benefits is especially likely since this type of ownership
structureboth reduces cash flow incentive alignmentand increases the potential
for managerialentrenchment.Conversely,if managersact in the best interestof
all shareholders,then firmvalues shouldnot dependon managerialcontrolrights.
Finally,to the extentthatmanagement'scontrolrightsarecorrelatedwith its cash
flow rights, additionalmanagerialcontrolcould resultin higherfirmvalues.
Non-managementblockholdersmight also impact firm value. If there are
large non-managementshareholdersthathave both the incentiveto monitormanagementand enough controlto influence managementsuch that cash flow is increased,firmvalues shouldbe higherbecause all equityholderssharein this benefit of control. Of course, as with managers,large non-managementblockholders
might choose to use their power to extractcorporateresources,which would reduce firmvalues. Finally,all of these factorsare potentiallyeven more important
where externalshareholderprotectionis the weakest. This papertests the above
hypothesesusing a sampleof 1433 firmsfrom 18 emergingmarkets.
Emergingmarketsprovidean excellent laboratoryto study the valuationeffects of ownershipstructurefor severalreasons. First, pyramidownershipstructures are prevalentacross virtuallyall emergingmarkets.Second, emergingmarkets generallysufferfrom a lack of shareholderand creditorprotectionand have
poorly developed legal systems (LLSV (1998)). Finally, marketsfor corporate
control(i.e., the takeovermarket)are generallyunderdevelopedin emergingmarkets (TheEconomistIntelligence Unit (1998)). Overall,where externalcorporate
governanceis weak and managerialcontroloften exceeds its proportionalowner-
Lins
161
ship, extrememanagerialagency problemsmay arisebecause the privatebenefits
of controlarelarge.1Non-managementblockholdersmay be especially beneficial
to minorityshareholdersif they help fill the externalgovernancevoid.
LLSV (2002) and Claessens, Djankov,Fan, and Lang (2002) provide some
evidence on the relationbetween firmvalue, as measuredby Tobin'sQ, and ownership structureacross differenteconomies. Both papersfocus exclusively on the
ownershipcharacteristicsof a firm'slargestshareholder,which is usually,but not
always, the managementgroupand its family. These papersdo not explicitly test
how the relationbetween management/familyownershipand firmvalue could be
affectedby otherblockholdersthat are not partof the management/familygroup.
LLSV study the 20 largestfirmsin each of 27 wealthyeconomies and reportthat
the cash flow rights held by the largestblockholderare positively relatedto firm
value. They find no relationbetween Q and a separationin the controlrights and
cash flow rights held by the largest blockholder.2 Claessens et al. (2002) study
a large set of firmsfrom eight East Asian emergingeconomies and also find that
the cash flow rightsheld by the largestblockholderarepositivelyrelatedto value.
Additionally,they find that a differencein the controlrights and cash flow rights
held by the largestblockholderis negativelyrelatedto firmvalue.
This paperbuildson previousworkrelatingownershipstructureto firmvalue
in severalways. First,in all of my samplefirms,I explicitly accountfor the effect
of managementgroup(andits family) ownershipandwhetherthereis a largenonmanagementblockholderpresentin the ownershipstructure.Since it is the management group that actually administersa firm, the reductionin value from potentiallycostly agency problemsmay be even worse when the managementgroup
has sufficientcontrolto exploit minorityshareholdersand there is no large nonaffiliatedblockholderto constrainit fromdoing so. Backman(1999) details many
examples of listed emerging marketfirms engaging in sometimes egregious expropriationof minorityshareholdersthroughrelated-partytransactions.3 Second,
because not every emergingmarkethas identical externalcorporategovernance
features,I test whetherany valuationeffects associatedwith ownershipstructure
are more pronouncedwhen shareholderprotectionsare the weakest. Finally, I
expandconsiderablythe numberof less developedcountriesin which ownership
and valuationare studiedand use a broadcross section of firmsfrom each.4
For all of my sample firms, I trace out ultimateownership,which includes
both directly and indirectlyheld control and cash flow rights. I employ a broad
definitionof managementgroupownership,consisting of a firm'sofficers, directors, and top-level managers,as well as their family members. I find that management groupblockholdingsof control (i.e., voting) rights average30% across
andTriantis(2000)arguethatagencyproblemsin emergingmarketsmay
Kraakman,
1Bebchuk,
be anorderof magnitude
largerthanthosein developedeconomies.
andYeung(2000)findthatfamilycontrolthroughpyramids
2In contrast,Morck,Stangeland,
reducesmarketvalueforCanadian
companies.
3My samplecontainsseveralof these firms--CAMInternational,
CheungKong Holdings,
Hyundai Corporation,Pacific Chemicals, Shangri-LaAsia, and Wembley Industries-all of which
have the managementgroup as the largestblockholderand most of which also have pyramidownership structures.
4For some country-specificevidence on ownershipconcentrationand valuationin emergingmarkets, see Denis and McConnell (2003), Claessens and Djankov(1999), Claessens (1997), and Xu and
Wang (1997).
162
Journalof Financialand QuantitativeAnalysis
my sample. I also groupnon-managementblockholdersinto variouscategories.
Interestingly,I findthatthe controlrightsblockholdingsof othershareholdersnot
affiliatedwith managementaveragealmost 20%, which indicatesthat large nonmanagementblockholdersmay play an importantcorporategovernancerole in
emergingmarketfirms. Managersand their families are the largestblockholder
in two-thirdsof samplefirms,consistentwith Claessenset al. (2002) andLa Porta
et al. (1999). I also find thatmanagersmake extensive use of pyramidownership
structuresin all sample countriesand thatmanagersof LatinAmericanfirmsfrequentlyuse shareswith superiorvoting rightsto furtherincreasethe controlrights
associatedwith theircash flow rights.
My valuationanalysis containsthree sets of tests. The first uses regression
models to test the relationbetween Tobin'sQ and managerialequity holdings, ignoringthe effect of the holdingsof non-managementblockholders.This approach
facilitatesdirectcomparisonwith LLSV (2002) andClaessenset al. (2002). When
a managementgroup'scontrolrightsexceed its cash flow rights(becauseof pyramiding and/or superiorvoting equity), I find that firm values are lower. I also
conduct tests using breakpointsin the level of managerialcontrol and find that
managerialcontrol between 5% and 20% is negatively related to Q, consistent
with the U.S. resultsof Morck,Shleifer,andVishny (MSV) (1988). These results
supportthe managerialentrenchmenthypothesisand indicatethatthe costs of the
privatebenefits of control are capitalizedinto shareprices in emergingmarkets.
Unlike LLSV (2002) and Claessenset al. (2002), I findno evidencethatincreases
in managerialcash flow rights affect Tobin'sQ.
My second set of tests provides new evidence that large non-management
blockholderscan reducethe valuationdiscountassociatedwith expectedmanagerial agency problemsin emergingmarkets. I categorize firms based on whether
the managementgroup is the largest blockholderof control rights and find that
managementcontrolin the 5% to 20% range is associated with a substantialreductionin Q only when the managementgroupis the largestblockholderof control rights. When a largernon-managementblockholderis present,management
controlin the 5% to 20%rangedoes not affect firmvalue. Regressionsalso show
thatQ is positivelyrelatedto the level of non-managementcontrolandto whether
a non-managemententity is the largestblockholderof controlrights.
In my third set of tests, I present evidence that the valuation impact of
pyramidstructuresand non-managementblockholdingsdepends on the level of
shareholderprotectionin a country.When managershave controlrights that exceed theirproportionalownership,firmvalues are significantlylower in countries
with low shareholderprotection.These findingssuggest thatexternalgovernance
mechanismsplay a role in restrainingmanagerswho do not bear the full cash
flow consequencesof exercising their privatebenefits of control. I also find that
the presenceof large non-managementblockholdersis more positively relatedto
value in low protectioncountries. One interpretationof this result is that nonmanagementblockholdersare a substitutefor formalexternalgovernancemechanisms.
The next section of the paper describes the sample selection process and
the ownershipvariablesused in the paper.Section III discusses the methodology
Lins 163
and describes the results. Section IV conductstests of robustnessand Section V
concludes.
II. Data
A. SampleSelectionandOwnership
Categorization
To constructmy sample, I obtainfirmlevel financialdatafor the fiscal yearend closest to December 31, 1995, from the 1997 Worldscopedatabasefor all
countries consideredto have emergingmarketsby The Economist magazine. I
eliminate financialfirmsfrom the analysis because Tobin's Q ratios are not suitable valuationmeasuresfor these firmsand eliminatefirmsnot listed on the stock
exchange(s) of a given countryto maintainconsistencyin within-countryreporting requirements.I also eliminate 15 firms with negative book equity values to
avoid capturingeffects that may be related to extreme financial distress.5 My
potentialsampleincludes 2533 firmsfrom 26 emergingmarkets.
I compile data on ultimate shareholdings,in which directly and indirectly
held sharesand superiorvoting rights shares,if any, are takeninto consideration.
I begin by collecting direct (first-level)ownershipof controlrights for all blockholders with stakes at or above a 5% thresholdfrom the most comprehensive
source for each country.A detaileddescriptionof ownershipsources is provided
in the Appendix. I investigatewhetherany differentialvoting rights sharesexist
using Datastream,Global Data Direct, and countryhandbooks.6 Countriesare
eliminatedif no primarydatasourcecan be obtainedthatreportsownershipfor at
least 50% of the potentialsample firms in the country(based on marketcapitalization) or if directblockholdingsare generallyreportedas categoricaldata(e.g.,
"othercompanies"),which cannot be tracedbackward. These screens result in
a loss of 521 firms. Because my hypotheses focus specifically on the valuation
effects of differenttypes of blockholders,I remove 164 widely held firms (i.e.,
firmswith no blockholdersat the 5% level) from the analysis.
Once the directblockholdersof my sample firmsare established,I traceout
the ultimatecontrol of these directblockholders.To do so, I use countryand regional handbooksand firm-levelsearches on Lexis-Nexis. I categorize a firm's
ultimateblock ownershipinto ManagementGroupownershipas well as ownership by variousnon-managemententities. I define managementgroupownership
broadly,comprisingpersonslisted as: CEO, CFO, President,or any otherofficer
and directorof the company;Executive, Deputy, or HonoraryChairman;Treasureror GeneralManager;and their family members(based on overlappingsurnames). Non-AffiliatedCompanyOwnershipis definedas the ownershipposition
of companiesnot affiliatedwith management.GovernmentOwnershipcomprises
5Removingthese firmsis also importantbecause cross-countrydifferencesexist in severalfactors
that influence the likelihood of observing firms with negative book equity, such as whetheran automatic stay on assets is allowable and whetheran equity capitalreservemust be maintained(see LLSV
(1998)). I can identify the largest blockholderin eight of these firms. Ownershipis similar to the
full sample-the managementcontrols six of the eight firms (four of these six have pyramids),the
governmentcontrols one firm,and a bank controls one firm.
6I include non-votingstock designatedas preferredstock in this measurewhen the dividendrights
and paymentsare equal to those of the common stock.
164
Journalof Financialand QuantitativeAnalysis
direct and indirectownershipby all agencies and companies that I can identify
as being state-controlled(e.g., TemasekHoldings in Singapore).I define InstitutionalOwnershipas ownershipby pensionfunds,mutualfunds,insurancecompanies, and directownershipby banks. I classify ownershipby personswho are not
managers(or family members)as IndividualOwnership.Miscellaneousrefersto
ownershipnot categorizedelsewhere (e.g., religious/educationalfoundationsand
employees). If the ultimate controllerof a direct blockholderof a sample firm
cannotbe clearly identifiedas being partof the managementgroupor belonging
to anothercategory,thatblockholdingposition is coded as unobservable.
Nominee accounts are used extensively in Asia. Fortunately,the Thornton
Guideto Asian Companiesidentifiesthe ultimateownerof the nominee accounts
for a large numberof Asian firms-such informationis generally not available
in Worldscopeor the handbooksused in other ownershipstudies. Still, it is often impossible for me to identify the ultimateowners of some nominee accounts.
Also, I am sometimesunableto find ownershipand managementdataon some of
the companies that are direct blockholdersof sample firms. I eliminate firms if
I cannotidentify the ultimatecontrollersof at least 90% of a firm'sdirect blockholdings. I also eliminate China and Poland because I am unable to identify
the controlof at least 90% of the blockholdingsin more than half of the sample
firms.7 My sample with ultimateownershipdata on controlrights contains 1433
firmsfrom 18 countries.8
Figure 1 illustrateshow I compute managementgroup controlrights using
a Brazilianfirm,Acos Villares, SA. Wheneverthe managersof Acos Villares or
their family membersare also the largest shareholdersof one of its blockholders, I classify these shareholdingsin the managementgroupcategory. Thus, the
50.1% of the voting shares owned by IndustriasVillares, SA are designated as
managementgroup controlrights. I also classify a blockholderas controlledby
the managementgroup if the managersof Acos Villares or their family members are partof the managementof the blockholder.Thus, the 5.8% of the voting
sharesheld by Acesita are also assignedto the managementgroup.I define "managementgroupcontrolrights"as the sum of directblock ownershipand indirect
controlblocks held by managersandtheirfamilies, which equals 55.9% for Acos
Villares,SA.9
I use my direct and indirectownershipinformationto determinewhat fraction of the cash flow rights is controlledby the managementgroup. I sum the
structure
7SeeTian(2001)foranownership
studyon Chinausingcustomizeddata.
concernthatarisesin my sampleselectionprocessis whetherthe firmsfor whichI can
80One
differentfromthepotentialsample.Toassessthispossibility,
dataaremeasurably
gatherownership
I compare,by country,summarystatisticsfor the financialvariableslistedin Table1 betweenmy
potentialsampleof 2533firmsandmy finalsample.I findsignificantdifferencesonlyforArgentina
I verifythatall resultsobtainedin the valuation
andIndonesia(65 firmsin total). Forrobustness,
sectionholdwhenthesecountriesareremoved.
fromthemethodusedby LaPortaet al.
9Mymethodof assigningcontrolrightsdifferssomewhat
(1999)andClaessenset al. (2000). Bothpapersassigncontrolbasedon the weakestlinkalongthe
Villares
controlrightsassignedto Industrias
chainof control,in whichcasethefamily(management)
wouldequal32.1%.Also,thesepapersdo not assigncontrolbasedon management
overlapwithout
cashflowownership.As such,La Portaet al. andClaessenset al. wouldclassifythe
corresponding
controlof Acesitaas eitherheldby a financialfirmorwidelyheld,depending
upontheconcentration
withinthepensionfundsthatcontrolAcesita.
of ownership
Lins 165
directly and indirectlyobtainedcash flow rights held by the managementgroup,
including the effects of any superiorvoting rights shares, and call this measure
"managementgroup cash flow rights."This ownershipis not always observable
since some of my ultimateownershipsources reportthe managementstructures
or beneficiariesof the blockholdersof my samplefirms,but not theircorresponding cash flow rights. When this occurs, I retain a firm only if the ultimate cash
flow rightsof at least 90%of the firm'stotal blockholdingscan be observed.This
reducesmy sample for tests involvingcash flow rightsto 1130 firms.
I next constructa measurecalled "managementcash flow rights leverage"
that identifies how much the managementgroup of a firm levers its cash flow
rightsinto greatercontrolrights. This measureis computedas managementgroup
controlrightsdividedby managementgroupcash flow rights.10 Cash flow rights
leveragewill be aboveunitywhen managershold indirectstakeswith less thanfull
ownershipor shareswith superiorvoting rights. To lessen the impactof outliers,
I censor the values for cash flow rights leverage at the 95th percentileby setting
outlying values to the 95th percentile.
As a simple example of managementcash flow rights leverage,suppose the
managementof Firm A owns 50% of the sharesof Firm B that owns 50% of the
shares of Firm A. I compute managementcash flow rights ownershipas 25%
(50% of 50%), managementcontrolrights ownershipas 50%, and management
cash flow rightsleverageas two (50%/25%).A morecomplicatedexample of the
computationof managementcash flow rights leverage is presentedin Figure 1.
The figure details how the managementgroup of Acos Villares SA uses both a
pyramidstructureand non-votingsharesto lever 2% of the cash flow rights into
56% of the controlrights for a managementcash flow rightsleveragevalue of 28
(the 95th percentilefor this measureis about 10).
Forrobustness,I gatherinformationon exchange-specificregulationsregardthe
ing
reportingof ownershippositions and then recomputeall ownershiplevels
counting only those positions that are above the requireddisclosure level (using
10%and then 20% as a cutoff when a specific level is not reported).11 I find that
my results are similarand often stronger(not tabulated).
B. OverallSummaryStatistics
Table 1 reportssummarystatisticsfor financialvariables(panel A) and ultimate ownershipvariables(panel B). The first column of panel A lists means of
my primaryvaluationmeasure,Tobin'sQ, which is computedas the marketvalue
of equity plus book assets less the book value of equity,all dividedby assets. To
alleviate the influence of extreme values, Tobin's Q is censored at the first and
99th percentiles by setting outlying values to the first and 99th percentiles, respectively. The second column shows that the sample is made up of relatively
variable
forthespread
controlandcashflowrightsis different
between
fromthatusedin
l'oMy
LLSV(2002)andClaessenset al. (2002).Bothpaperscomputethemeasureas thedifference
between
controlandcashflowrights(ratherthanthe ratio)and,as notedin the Introduction,
do so only for
each firm'slargest blockholder.
1Data on requiredreportingcome from a worldwidesurveyof stock exchangeregulations(Zenner
(1995)).
166
Journalof Financialand QuantitativeAnalysis
1
FIGURE
Structure
of AcosVillares,
SA
Ownership
58 6
AcosVillares,
SA
Pres:P.D.Villares
VP:W.N.Brumer
Shares
Voting
(36%)
Shares
Non-Voting
(64%)
50.1
IndustriasVillares,SA
Shares
31( Voting
(34%)
(
20.940
BNDESPAR
(Government
DevelopmentBank)
Pres:P.D.
Villares
Shares
Non-Voting
(66%)
32.6
20
P.D.Villares
SulAmerica
Group
(Investment
Fund)
nvestment
Fund)
Sample Calculations
Management
GroupControlRights:
+
0.501
0.058 = 0.559
Acesita
Pres:W.N.Brumer
(CiaAcosEspeciais
Itabira) (nocashflowownership)
Voing Shares
(67%)
48.4
Non-VotingShares
(33%)
28
8'(PD
(Ind.Villares) (Acesita)
Management Group Cash Flow Rights:
(obtained through Ind. Villares only)
[(0.326) * (0.34)]*[(0.501) * (0.36) = 0.02
Villares) voting (Ind. Villares) voting
fraction
fraction
PensionFunds
(e.g.,Petros,Previ,Sistel)
largefirms,with mean assets of $886 million. The thirdcolumnshows that South
Koreanfirmshave the most debt as measuredby total liabilities to assets.
The first two columns of panel B show that about 50% of a firm's control
rightsare held by 5% (or greater)blockholders,on average.Of these, about60%
are held by the managementgroup. Thus, the percentageof blockholdercontrol
rightsheld by entitiesotherthanmanagementis also substantial,averagingalmost
40%of totalblockholdings.The lattercolumnsof panelB list the frequencythata
given type of owneris the largestultimateblockholderof controlrights. The table
shows thatthe managementgroupis, by far,the dominanttype of blockholderin
emergingmarkets,controlling69% of sample firms, followed by companies not
affiliatedwith the managementgroup(16%)and the government(7%). Financial
entities arerarelya firm'slargestultimateblockholderin emergingmarkets.
Table2 reportsstatisticson the mechanismsused to achievemanagerialcontrol using the 1012 firms for which the managementgroup is the largestblockholder of the controlrights of a firm. Panel A reportsthat 66% of managementcontrolledfirms use pyramidsto increase their control rights.12 I also find that
12My results for South Korea, Taiwan, and Thailand differ somewhat from those reportedby
Claessens et al. (2000) who find a higherincidence of pyramidsfor the controllingshareholder.I study
only management-controlledfirms and my classification mechanismsfocus on establishingmanagement control at any level above 5%, whereas they reportpyramiddata only for firms with a 20% or
largerblockholder.Firmsin which managementcontrol is less than 20%, but managementis still the
Lins
167
TABLE1
SummaryStatistics
PanelA.
FinancialVariables
PanelB.
UltimateOwnershipVariables
Control
Rights
Country
N
3147
2685
1257
0.42
0.44
0.36
0.11
0.07
0.08
16
34
45
38
38
14
33
52
83
67
25
13
0
15
0
0
3
7
0
2
0
0
3
0
10
219
53
12
262
1.13
1.24
1.33
1.34
2.24
158
824
446
989
514
0.41
0.45
0.45
0.49
0.45
0.11
0.06
0.09
0.07
0.09
21
41
36
31
29
22
12
23
19
25
60
80
65
67
69
40
16
19
25
11
0
1
7
8
13
10
2
2
0
8
0
0
8
0
0
0
0
0
0
0
10
35
1.82
1.61
316
489
0.42
0.33
0.10
0.11
41
44
22
11
70
83
20
6
0
9
10
6
0
0
0
0
0.90
1.64
1.48
1.03
1.11
1.67
1.36
1.88
520
447
935
237
59
436
387
330
0.52
0.43
0.44
0.72
0.40
0.38
0.53
0.47
0.05
0.09
0.07
0.09
0.13
0.06
0.09
0.07
31
33
34
16
30
18
21
31
23
26
26
8
7
5
20
34
69
66
57
73
85
82
56
50
12
10
16
8
0
10
34
25
8
12
0
7
0
3
6
18
15
11
26
6
14
2
2
4
0
0
1
5
0
1
2
0
0
1
0
1
0
2
1
4
9
59
30
Czech Rep.
Hong Kong
Indonesia
Israel
Malaysia
Portugal
Singapore
So. Africa
So. Korea
Sri Lanka
Taiwan
Thailand
Turkey
NonNonNonAffiliated
Tobin's Total Debt Capex/ Mgmt. Mgmt.
Affiliated
0
Assets Ratio Assets BH
BH Mgmt. Co.
Gov't. Inst. Indiv. Misc.
1.14
0.81
1.61
Argentina
Brazil
Chile
Peru
Philippines
Frequencyof Control
by BlockholderType
26
146
96
163
7
119
149
28
AllCountries 1433
1.52
886 0.48 0.08
30
19
69
7
16
7
1
1
Summarystatisticsare reportedfor financialvariablesin panel A and for ultimateownershipvariablesin panel B. In
panel A, Tobin's0 is computedas the marketvalue of equityplus book assets less the book value of equityall divided
by assets and is censored at the 1st and 99th percentilesby setting outlyingvalues to the firstand 99th percentiles,
respectively. TotalAssets are reportedin millionsof $U.S. The Debt Ratiois computedas total liabilitiesto assets.
MeanValuesare reportedin panel A. PanelB lists the percentageof totalControlRightsheld by blockholdersand the
frequencythatan ownershiptype is the largestblockholderof controlrights.The Management(Mgmt.)groupcategory
aggregates directownershipof votingshares and indirectcontrolobtainedthroughpyramidsforpersons listedas CEO,
CFO,President,or other officersand directors,Executive,Deputy,or HonoraryChairman,and GeneralManager,as
well as familymembersof these managers. Non-Affiliated
CompanyOwnershipis definedas the ownershippositionof
companiesnot affiliatedwithmanagement.Government(Gov't.)Ownershipcomprisesdirectand indirectownershipby
all agencies and companiesthat I can identifyas being state-controlled.Institutional
Ownership(Inst.)is ownershipby
pension funds, mutualfunds, insurancecompanies, and directownershipby banks. I classify ownershipby persons
whoare notmanagers(orfamilymembers)as Non-Affiliated
Individual
(Indiv.)Ownership.Miscellaneous(Misc.)refersto
foundationsand employees). Non-management
control
ownershipnot categorizedelsewhere(e.g., religious/educational
rightsaggregates the ultimatecontrolrightsheld by allentitiesotherthanmanagement.BHrefersto blockholdings.
shares with superiorvoting rights are used extensively in Brazil and Peru, but
rarely are used by sample firms outside of Latin America.13 Panel B of Table 2
reportsstatisticson managementcash flow rightsleverage. The panel shows that
controllingmanagersare able to turnone cash flow right into 2.7 controlrights,
on average.
In panel C of Table 2, I dig more deeply into managementusage of shares
with superiorvoting rights in the two sample countriesin which superiorvoting
shares are prevalent,Brazil and Peru. Note from panel A that managersof firms
from these countriesuse pyramidsfrequently.PanelC summarizesthe fractionof
non-voting shares in the common equity capital structureoverall and by largest
blockholdertype. I findthatthe equity structuresof management-controlled
firms
are heavily weighted towardnon-voting shares. The median non-voting equity
percentageof 63%is very close to the legally permittedthresholdof 66% in these
largestblockholder,occur frequentlyin these threecountriesand managementusually holds its shares
directly in these cases.
13Nenova(2003) also finds substantialuse of non-votingequity by Brazilianfirms.
168
Journalof Financialand QuantitativeAnalysis
TABLE
2
Control
Mechanisms
to AchieveManagement
PanelA.
FirmswithMgmt.
ControlRights
ObtainedIndirectly
PanelB.
Mgmt.Cash Flow
RightsLeverage
Country
N
%
N
(Mean)
Argentina
Brazil
Chile
Czech Rep.
HongKong
Indonesia
Israel
Malaysia
Peru
Philippines
Portugal
Singapore
So. Africa
So. Korea
SriLanka
Taiwan
Thailand
Turkey
AllCountries
3
30
25
6
179
37
8
189
8
29
18
99
55
119
6
102
83
16
1012
100
73
92
100
67
81
75
85
88
90
61
83
89
30
67
37
36
100
66
0
12
11
6
147
22
4
110
3
22
9
60
29
115
4
88
68
9
719
4.43
5.53
5.34
1.58
1.30
3.62
3.39
1.58
3.02
2.00
4.63
3.02
2.58
1.38
2.54
1.98
1.72
2.68
PanelC. ManagementUse of Differential
VotingRightsShares
LargestBlockholder
Countries
Brazil,Peru
AllFirms
N = 68
Mean
Med
Mgmt
Group
(N = 36)
Mean
Med
Non-Mgmt
Group
(N = 32)
Mean
Med
Difference
(p-value)
Mean
Med
0.14
0.22
0.63
0.39
0.41
0.51
0.53
0.45
Fractionof
(0.01)
(0.00)
non-votingshares
The sample used in this table includesonly those firmsforwhichthe managementgroupis the largest blockholderof
the controlrightsof a firm. Panel A reportsthe percentage of firmsfor which the managementgroup obtains some
controlrightsindirectly.PanelB reportsmeanmanagementcash flowrightsleverage,whichis computedas management
groupcontrolrightsdividedby managementgroupcash flowrightsand includesbothpyramidand superiorvotingequity
effects. Thisvariableis coded as missingifthe fractionof unobservedmanagementgroupcash flowrightsexceeds 10%
of the managementgroups'ultimateblockholdingsof controlrights.The values forcash flowrightsleveragehave been
truncatedat the 95th percentile.PanelC summarizesthe fractionof non-votingshares in the equitycapitalstructurefor
the two sample countries(Braziland Peru)in whichnon-votingequityshares are prevalent.The fractionof non-voting
shares cannotbe determinedforthreefirms. The differencein means is computedusing a t-test and the differencein
mediansis computedusing a Wilcoxonrank-sumtest. p-valuesare listedin parentheses.
two countries. In contrast,firms controlledby other entities have mostly voting
sharesin theirequity structure.
To furtherinvestigatemanagement'susage of superior-votingequityin Latin
America,I examinethe 64 Mexican firmsfor which I could not obtainconsistent
ownershipdataand findthatalmosthalf of these firmshave limited or non-voting
equity in their capital structures. In La Porta et al. (1999), all 20 sample firms
in Mexico are controlledby management/families. It appearsthat, relative to
managerselsewhere, managersof Latin Americancompaniesare unique in their
propensityto use superiorvoting rightssharesto separatecontrolrightsfromcash
flow rights. This observationwarrantsfurtherstudy.
Overall, the ownership structuressummarizedin Tables 1 and 2 indicate
that emergingmarketsprovidea rich setting to test whetherpotentialmanagerial
agencyproblemsarecapitalizedin firmvalues andwhetherlargenon-management
blockholdersplay a governancerole.
Lins 169
Ill. ValuationMethodology
and Results
A. ValuationMethodology
To assess the relationbetween ownershipstructureand firmvalue, I firstuse
basic OLS regressionsin which Tobin's Q is the dependentvariableand ownership and controlvariablesare the independentvariables. In Section IV, I implement regressiontechniquesthat consider potential endogeneitybetween ownership and Tobin'sQ and also consideralternatefirmvalue measures.
My regressionsincludea varietyof controlvariablesto ensurethatthe effects
I attributeto ownershipare not due to othercorrelatedfactors. I controlfor firm
size with the log of assets (in U.S. dollars). I use the ratio of capitalexpenditures
to assets as a proxy for potentialinvestmentopportunities.14 I control for debt
to accountfor the possibility that creditorsare able to lessen managerialagency
problems(McConnelland Servaes (1995) and Harvey,Lins, and Roper (2002)).
I measuredebt as the ratio of total liabilities to assets, which incorporatesstructuraldifferencesbetween countriesin the types of short-and long-termfinancing
instrumentsused by firms (Demirgiig-Kuntand Maksimovic(1999)). All regressions include industrydummy variablesbased on industrygroupingsdefined in
Campbell(1996). 15
To accountfor the possibilitythatinter-countryvariationin accountingtreatments affects the measurementof Q and other variables,I include countrydummies in all regressions.I considermodels in which countryeffects are allowed to
be randomas my base case for all regressions,but choose a fixed effects framework for two reasons. First, a fixed effects model is designed to test for variation
in the ownershipand Q relationwithin a country. Second, the Hausmantest rejects the null that country effects are randomin (unreported)regressions with
managementownershipand shareholderprotectioninteractionsand in many of
the basic ownershipregressionsusing alternativemeasuresof firmvalue.16
B. ValuationResults-Management GroupOwnership
In this section, I constructtests thatconsideronly the relationbetween managerial ownershipcharacteristicsand firm value and do not accountfor the presence of outsideblockholders.This approachfacilitatescomparisonwith previous
internationalownershipstructurestudies. The first model in panel A of Table 3
tests a simple version of the managerialentrenchmenthypothesis by regressing
Tobin's Q on the percentageof control rights held by management. The model
14Analternativeproxy for investmentopportunitiesused by LLSV (2002) is annualgrowthin sales
over prioryears. This proxy does not workwell for my emergingmarketssamplebecause Worldscope
does not reportpre-1995 data for a significantportion of my firms. I note that annual sales growth
(where available)is highly correlated(p-value < 0.000) with the capex/assetsratio of sample firms.
15Theseindustrygroupings are commonly used in internationalfirm valuation studies (see Lins
and Servaes (1999), (2002) in additionto Claessens et al. (2002)).
16Thechoice between fixed and randomeffects is often subject to interpretation,even in the absence of a rejection by the Hausmantest. Greene (1997), p. 623, provides an example analogous to
my frameworkin which fixed effects are chosen in an inter-countrycomparisonbecause the sample
includes a nearly exhaustive set of countries (e.g., emerging markets)for which it is reasonable to
assume that the model is constant.
170
Journalof Financialand QuantitativeAnalysis
provides no evidence (at conventionalsignificance levels) that higher management controlrightsare linkedto lower firmvalues.
I next performtests of the managerialentrenchmenthypothesisthattake into
accountpotentialnon-linearitiesin the relationbetween managementownership
and firm value along the lines of MSV (1988). I use control rights ownership
for these tests since they will always be equal to or higher than the cash flow
rights held by managementand I can observe controlrights more frequentlyfor
my sample firms. MSV arguethat managemententrenchmenteffects dominate
incentivealignmenteffects over a low to intermediatelevel of managementgroup
ownership. They choose breakpointsin the range of managementownershipat
5% and 25%, althoughthey note that these cutoffs were chosen to fit their data.
For my tests, I use a 5% to 20% range because it is likely that effective control
can be obtainedat relativelylow levels in emerging markets. I create a dummy
variableequal to one when the managementgrouphas between 5% and 20% of
the control rights of a firm and a dummy equal to one if managementcontrols
more than 20% of the firm. These dummy variableskeep the interpretationof
coefficients simple-similar dummy variablesfor managementownershipcells
were used in working paper predecessorsto MSV (1988). I also follow MSV
(1988) and estimate a piecewise linear regressionusing a variablefor the level
of managementcontrol between 5% and 20% computedas actual management
control rights if they fall within this range, 0.20 if managementcontrol rights
exceed 20%, and zero if no blockholdingsare held by management. Similarly,
TABLE
3
Relationbetween Ownershipand FirmValuein EmergingMarkets
PanelA. ManagementGroupOwnership
Constant
(5)
(1)
(2)
(3)
(4)
1.949
2.030
2.735
1.891
1.841
(0.00)
(0.00)
(0.00)
(0.00)
(0.00)
Logof Assets
-0.075
-0.070
-0.066
(0.00)
(0.00)
(0.00)
(0.00)
(0.00)
LeverageRatio
-0.369
(0.01)
0.256
(0.33)
-0.144
(0.11)
-0.357
(0.01)
0.247
(0.35)
-0.363
(0.00)
0.248
(0.35)
-0.379
(0.00)
0.224
(0.39)
-0.301
(0.04)
0.275
(0.35)
to Assets
CapitalExpenditures
Mgmt.GroupControlRights%
-0.079
Dummyif Mgmt.Controlsbetween5%and 20%
-0.176
Dummyif Mgmt.Controlsabove 20%
-0.131
-0.078
(0.01)
(0.01)
-0.865
Levelof Mgmt.Controlbetween5%and 20%
(0.03)
0.112
(0.39)
Levelof Mgmt.Controlabove 20%
Mgmt.IndirectControlDummy
-0.090
(0.04)
-0.022
Mgmt.Cash FlowRightsLeverage
Adj.R2
No. of Obs.
(0.02)
0.25
1433
0.25
1433
0.25
1433
0.27
1130
(continuedon nextpage)
0.25
1433
171
Lins
3 (continued)
TABLE
Relationbetween Ownershipand FirmValuein EmergingMarkets
Blockholders
PanelB. Non-Management
(1)
Constant
Logof Assets
LeverageRatio
to Assets
CapitalExpenditures
Non-Mgmt.GroupControlRights%
(2)
1.871
1.824
1.882
(0.00)
-0.077
(0.00)
-0.352
(0.01)
0.246
(0.35)
0.259
(0.01)
(0.00)
-0.077
(0.00)
-0.352
(0.01)
0.242
(0.36)
0.321
(0.01)
0.083
(0.53)
(0.00)
-0.078
(0.00)
-0.359
(0.01)
0.245
(0.35)
Mgmt.GroupControlRights%
Dummyif Mgmt.Groupis notthe LargestBlockholder
DummyifMgmt.GroupControlsbetween5%
and 20%and is the LargestBlockholder
Dummyif Mgmt.GroupControlsbetween5%
and 20%and is notthe LargestBlockholder
DummyifMgmt.GroupControlsabove 20%
and is the LargestBlockholder
Adj.R2
No. of Obs.
(3)
(4)
2.014
(0.00)
-0.078
(0.00)
-0.361
(0.01)
0.225
(0.39)
0.142
(0.00)
-0.264
(0.00)
-0.021
(0.83)
-0.127
(0.01)
0.25
1433
0.25
1433
0.25
1433
0.25
1433
Regressionanalysisof the dependentvariableTobin's0 on categoriesof managementownershipand controls.Tobin'sQ
and mostof the independentvariablesare definedinTables1 and 2. Variablesnew to thistable are as follows.Dummyif
Management(Mgmt.)Controlsbetween5%and 20%is an indicatorvariableset equalto one ifmanagementcontrolrights
fallwithinthis rangeand zero otherwise.Dummyif ManagementControlsabove 20%is an indicatorvariableset equalto
one if managementcontrolrightsexceed 20%and zero otherwise.Levelof ManagementControlbetween5%and 20%
is set equal to: actualmanagementcontrolrightsif theyfallwithinthis range;0.20, if managementcontrolrightsexceed
20%;and zero if managementhas no controlrightsblockownership.Levelof ManagementControlabove 20% is set
equalto: actualmanagementcontrolrightsiftheyexceed 20%;and zerootherwise.ManagementIndirectControlDummy
equals one if the managementgroupobtainsat least some of its controlrightsindirectly.Dummyif ManagementGroup
is not the LargestBlockholderis set equal to one if a non-managemententityis the largestcontrolrightsblockholder.
PanelA regressionsfocus on managementgroupownershipvariables.Model(3) is a piecewise linearregressionsimilar
to MSV(1988). Model(5) is estimatedon the subsampleof firmsforwhichmanagementcash flowrightsleveragecan be
computed. The regressionsin panel B includenon-managementcontrolrightsvariables.Allregressionmodels include
countryand industryfixed effects (coefficientsnot reported). Industrygroupingsare based on Campbell(1996). The
p-valueof the t-testof equalityof each coefficientto zero is reportedin parentheses.
a variablefor the level of managementcontrol above 20% is set equal to actual
managementcontrolrightsif they exceed 20%, and zero otherwise.
Model (2) of panelA shows thatthe dummyvariablesfor managementgroup
controlbetween 5% and 20% and above 20% areboth significantlynegativelyrelatedto firmvalue. While the coefficienton the 5%to 20%rangeis morenegative,
it is not significantlydifferentfrom the above 20% coefficient. Model (3) reports
the results of the piecewise linear regressionin which the slope of managerial
controlis allowed to change. The coefficient on managerialcontrolbetween 5%
and 20% is -0.865, which indicates that, among firms with potential managerial entrenchmentproblems,each percentagepoint increasein managerialcontrol
rightsis associatedwith a 0.0087 decline in Tobin'sQ. The coefficienton the level
of managerialcontrolabove 20% is not significant.To the extent thatmanagerial
controlin the 5%to 20%rangeproxiesfor potentialmanagerialentrenchment,the
172
Journalof Financialand QuantitativeAnalysis
results of models (2) and (3) provide supportfor the hypothesisthat firm values
are lower as the potentialfor managemententrenchmentincreases.17
The last two models of panel A investigatethe valuationimpact of mechanisms used by managementto separatecontrol rights from cash flow rights in
emergingmarkets.In model (4), I regressTobin's Q on a dummyvariableequal
to one if the managementgroupobtainsat least some of its controlrightsthrough
pyramidsand find a negativeand significantcoefficient on this dummyvariable.
The coefficient indicates that when managersuse pyramidsto obtain some of
their control, Tobin's Q values are 0.09 lower. Model (5) tests the relation between managementcash flow rights leverage and firm value using the sample of
1130 firms for which managementcash flow rights, and thus managementcash
flow rightsleverage,can be computed.This model shows thatfirmvalue declines
as the separationof managementgroup control and cash flow rights gets larger.
The coefficient of -0.022 indicates that, all else equal, a firm with an extreme
cash flow rights leverage value of 10 would have a 0.198 lower Q value than a
firmwith a cash flow rightsleveragevalue of one (no separation).
The results from models (4) and (5) highlight the overall loss in firm value
that results when the managementgroup'scontrol exceeds its proportionalownership. Thus, these results are consistent with the hypothesis that the expected
privatebenefitsof controlaffect firmvalue in emergingmarkets.In an unreported
model, I regressQ on the cash flow rightsheld by management(which are highly
correlatedwith controlrights;p = 0.60, p-value < 0.0000), but find thatthey are
not significantlyrelatedto value. These resultsprovideno supportfor the Jensen
and Meckling (1976) convergence-of-interestshypothesis in emerging markets
and differfrom those reportedby LLSV (2002) and Claessens et al. (2002).
C. ValuationResults-Non-Management Blockholders
The previoussets of tests provideevidence thatpotentialmanagerialagency
problemsare relatedto the valuationof firms from emergingmarkets.However,
these tests do not tell the full story of firm-level corporategovernance, since
they fail to take into account any positive or negative impact that large nonmanagementblockholdersmight have on the actions of management. Panel B
of Table3 containsregressionmodels that incorporatethe controlrights held by
blockholdersthat are not part of the managementgroup, an approachsimilar to
the one takenby McConnell and Servaes (1990) for U.S. firms. Overall, my results show that it is beneficial to separatelyinvestigate the valuationeffects of
managementand non-managementblockholders,ratherthan focusing solely on
the categoryof "largestblockholder"as has been done previouslyin international
ownershipstudies.
Model (1) of panel B shows thatthe controlrightsheld by non-management
blockholdersare positively relatedto firmvalue, which is consistentwith the hypothesis that these blockholdersplay a monitoringrole of some sort in emergmodels,I testcutoffsof 15%,25%,and30%usingbothdummyandlevelvariables
l7In unreported
controlrightsandthesquareof management
andfindsimilarresults.I alsoregressQon management
controlrights(Stulz(1988)andMcConnellandServaes(1990))andfindthatthecoefficienton manat the5%level,whilethecoefficienton thesquared
agementcontrolrightsis negativeandsignificant
term is insignificant.
Lins 173
ing markets. This conclusion is reaffirmedin regression model (2), which includes both managementand non-managementcontrol rights. The control of
non-managementblockholdersremainspositively and significantlyrelatedto firm
value, while the controlrightsof the managementgroupareagainnot significantly
relatedto firmvalue.
To isolate situationsin which large blockholdersare likely to have the greatest influence over the managementof a firm, I create a dummy variableequal
to one when the managementgroupis not the largestblockholderof the control
rights of a firm. This is the case for aboutone thirdof my sample firms(see Table
1). Model (3) of panel B of Table 3 shows that a controllingnon-management
blockholderis associated with an increase of 0.142 in Tobin's Q. This result is
again consistent with the idea that large non-managementblockholderscan provide beneficialgovernancein emergingmarkets.18
Model (4) of panel B is designedto assess whethercontrollingnon-management blockholdersmight be able to lessen the agency costs of managerialenthat can be inferredfrom models (2) and (3) of panel A. 19 I create
trench:Tlent
an interactionbetweenthe 5%to 20%managementcontrolrightsdummyand the
dummywhen managementis the largestsingle blockholderof controlrights. This
interactionvariableshouldcapturethe type of managementownershipthatis most
likely to face the entrenchmentproblemsdescribedin MSV (1988). I also create
a dummy equal to one if managementcontrols between 5% and 20% and is not
the largest blockholder.The coefficient on this interactionvariablewill provide
an indicationof whetherthe presenceof a large externalblockholderreducesthe
loss in firm value associatedwith potentialagency costs of managerialentrenchment.20 Finally, I compute a dummy variableequal to one when management
controlsmore than20% and is the largestblockholder.Again, the use of dummy
variablesfor these rangeseases the interpretationof the interactioncoefficients.
18Tosee if specifictypesof non-management
blockholders
affectfirmvaluedifferently,
I construct
of controlrightsis a non-affiliated
dummyvariablesequalto oneif thelargestblockholder
company,
is thegovernment,
or is an institutional
owner,andestimatea modelthatincludesthesethreelargest
blockholder
dummies.I finda significant
difference(atthe 10%level)onlybetweenthedummywhen
the largestblockholder
is a non-affiliated
is
companyandthedummywhenthe largestblockholder
an institution.Sincethisresultdoesnotprovidecompellingevidencethattherelationbetweenfirm
valueanda largenon-management
blockholder
blockholder,
dependson thetypeof non-management
I continueto groupall non-management
blockholders
togetherwhenconducting
myvaluationtests.
of thecoefficientson managerial
controlcontainedin models
19Itis possiblethatthe significance
sincenon-management
whichare
(2) and(3) of Table3 is dueto spuriouscorrelation,
blockholdings,
relatedto Tobin'sQ, areomittedfromthesemodels.It is not appropriate,
significantly
however,to
test thisconjectureby includingin thesemodelsnon-management
controlrightsor a dummyif the
becausebothmeasuresarehighlynegativelycormanagement
groupis not thelargestblockholder,
relatedwithmanagement
controlabove20%. Instead,I use a dummyequalto one if thereareany
as a coarse,butnothighlycorrelated,
controlfor non-management
non-management
blockholdings
effectson value.I findthatthisdummyis positivelyandsignificantly
relatedto Q andthatthecoefficientsforbothdummiesandlevelsof managerial
controlin the5%to 20%andabove20%ranges
retaintheirmagnitude
andsignificance
(if any)frompriorregressions.
20Withtheexceptionof majority
workbyHolderness
andSheehan(1988)andDenisand
ownership
Denis(1994),priorresearchon managerial
andvaluehasnotexplicitlystudiedwhethera
ownership
differential
valuation
relationexistswhenmanagers
arethelargestcontrolling
entity(seeHimmelberg,
Hubbard,andPalia(1999),Holderness,Kroszner,andSheehan(1999),Cho (1998),Lodererand
Martin(1997),Kole (1996),McConnellandServaes(1995),andHermalinandWeisbach(1991),
amongothers,in additionto previouslyreferenced
papers).
174
Journalof Financialand QuantitativeAnalysis
Recall that panel A shows a negative and significantrelationbetween firm
value and the dummy variablefor managementgroup control between 5% and
20%, irrespectiveof whetherthis is the largest block position. The results are
much different,however, when I isolate firms in which the managementgroup
controlsbetween5%and20%,butthe managementgroupis not the largestblockholder.As model (4) of panel B shows, the coefficienton this interactiondummy
is insignificant. Conversely,when managementcontrols between 5% and 20%
and it is also the largestblockholder,a situationin which managementmay have
both the ability and desire to consume privatebenefits of control, the regression
coefficient is stronglynegative. The coefficient indicates a reductionin Tobin's
Q of 0.264 in this case.21 These findings demonstrateagain the governancepotentialof largeinvestorsin emergingmarkets,since managementgroupcontrolin
the "entrenchment"
rangedoes not correspondto a reductionin firm value when
a non-managemententity controlsthe firm.
D. Valuation
Results-OwnershipandShareholderProtection
Emergingmarketsare usually, but not always, associated with low shareholderprotection.Since thereis some dispersionin protection,one might expect
that managerscan more easily consume the privatebenefits of control in countries where investors are least protectedby the law (LLSV (2000)). If this potential incrementalconsumptionof privatebenefitsis priced, one should observe
lower values for firms with potentiallyextreme managerialagency problems as
shareholderprotectiondeclines. To test whethershareholderprotectionmatters,
I combine measures of shareholders'legal rights and the enforcementof such
rights obtainedfrom LLSV (1998). The first is the "AntidirectorRights" score,
which ranges from zero to five with lower scores correspondingto fewer shareholderrights. The second is the "Ruleof Law" score for a country,which ranges
from zero to 10 with lower scores correspondingto less traditionfor law and order. These variablesare not reportedfor the Czech Republic so firms from this
countryare excludedfrom this analysis.
In my empiricaltests, I first use a randomeffects model that interactsmanagementgroupownershipvariablesanda country'sweightedaverageAntidirector
Rights andRule of Law score. This type of model has the potentialto incorporate
both between- and within-countryeffects of ownershipon value-a fixed effects
model is poorly suited for testing between-countryeffects. Unfortunately,the
Hausmantest rejectsthe null specificationthatcountryeffects arerandomin these
models. Since a randomeffects model is inappropriate,I test whethermanagement agency problemsare more severe in low protectioncountriesby estimating
my previouscountryfixed-effectsmodels on a subsetof firmsfromcountrieswith
low AntidirectorRights and a low Rule of Law. This "low protection"subsample
includes countriesthat score at or below four on the AntidirectorRights measure
groupcontrolbetween5%and15%,25%,
21Inunreported
models,I testdummiesformanagement
is also the largestblockholder.Thecoefficientson thesedummiesare
and30%whenmanagement
always stronglynegativeand significant(p-value= 0.00), indicatingthatmy resultis robustto changes
cutoffpoint.
in thechoiceof anownership
Lins 175
and at or below seven on the Rule of Law measure. This subsample excludes
firmsfrom Chile, Hong Kong, Portugal,Singapore,SouthAfrica, andTaiwan.22
Table 4 reportsownershipstructuretests using the low protectionsubsamThe
models reportedcorrespondexactly to those in Table 3. Mean Tobin's
ple.
in
the
low
Q
protectionsubsampleis 1.58, which is close to the mean Q value
of 1.52 for the full sample. Therefore,for the purposeof assessing economic effects, the regressioncoefficientsfor the low protectionsubsamplecan essentially
be directly comparedto those from Table 3 featuringthe full emergingmarkets
sample. The first model of panel A in Table 4 shows that managementgroup
control rights have a negative and significantrelationto firm value in emerging
marketswith relativelyweak externalgovernancemechanisms. This coefficient
is differentfrom the high protectionsubsamplecoefficienton managerialcontrol
at the 5% level (significancebased on combined regressiontests). This finding
lends some supportto the hypothesisthatthe valuationconsequencesof managerial agency problems are worse when externalgovernanceis weak. Models (2)
and (3) of Table4 conductsubsampletests using dummiesandlevels for management controlin the 5% to 20% and above 20% ranges,withoutregardto whether
managementis the largestblockholder.In both models, the coefficients on managerial control in the 5% to 20% range are more negative in the low protection
subsample,but not significantlyso. Thus, it does not appearthatmanagemententrenchmenteffects measuredusing the 5% to 20% range of managementcontrol
are any worse when shareholderprotectionis weak.
Model (4) of panel A in Table4 tests whetherthe valuationsof firms with
potentialmanagerialagency problemsstemmingfrom pyramidownershipstructuresarelower when shareholderprotectionis the weakest. The coefficienton the
managementindirectcontroldummyof -0.19 is significantat the 1%level and
is significantlydifferentfrom the high protectioncoefficientat the 1%level. This
comparesto a Table3 coefficienton managementindirectcontrolof -0.09 in the
full emergingmarketssample. Model (5) shows a largernegative coefficient on
the cash flow rights leverage variablein low protectioncountries(-0.037 compared to -0.022). The differencein this coefficient between low and high protection subsamples,however,is not significantat conventionallevels (p-value =
0.11). Takentogether,models (4) and (5) in panel A of Table4 provide support
for the hypothesis that the negativerelationbetween firm value and a separation
in managementcontrol and cash flow rights is more pronouncedwhere external
corporategovernancemechanismsare weakest.
In panel B of Table4, I test whetherthe positive relationbetween large nonmanagementblockholdersand firm value is more pronouncedin countrieswith
low externalshareholderprotection.The firstmodel shows thatnon-management
controlrights are again stronglypositively relatedto firmvalue when shareholder
protectionis relativelyweak. The differencein this relationbetweenlow andhigh
protectionsubsamplesis significantat the 10%level. Model (2) incorporatesboth
221alsoattempta country-by-country
analysisin whichtherelationbetweenownership
andvalue
is obtainedforeachcountryandthenthe ownership
coefficientsfromeachcountryareregressedon
measuresof shareholder
I amunableto obtainmeaningful
resultsusingthis
protection.
Unfortunately,
becausetheownership
coefficientsarerarelysignificant
in thecountrieswithsmallsample
procedure
sizes.
176
Journalof Financialand QuantitativeAnalysis
4
TABLE
inEmerging
Firm
Protection
Markets
Relation
betweenOwnership, Value,andShareholder
PanelA. ManagementGroupOwnership
(1)
Constant
Logof Assets
LeverageRatio
to Assets
CapitalExpenditures
Mgmt.GroupControlRights%
2.720
(0.00)
-0.120
(0.00)
-0.408
(0.04)
0.058
(0.87)
-0.318**
(0.03)
Dummyif Mgmt.Controlsbetween
5%and 20%
Dummyif Mgmt.Controlsabove 20%
(2)
(3)
(4)
(5)
2.834
(0.00)
-0.126
(0.00)
-0.387
(0.05)
3.883
(0.00)
-0.101
(0.01)
-0.148
(0.61)
0.003
(0.61)
-0.013
(0.06)
2.564
(0.00)
-0.108
(0.00)
-0.426
(0.03)
0.009
(0.97)
2.257
(0.00)
-0.081
(0.01)
-0.327
(0.14)
-0.001
(0.77)
0.048
(0.89)
-0.250
(0.01)
-0.218*
(0.01)
-0.865
(0.03)
0.112
(0.39)
Levelof Mgmt.Controlbetween
5%and 20%
Levelof Mgmt.Controlabove 20%
-0.190***
(0.01)
Mgmt.IndirectControlDummy
Mgmt.Cash FlowRights
Leverage
0.29
Adj.R2
789
No. of Obs.
Blockholders
PanelB. Non-Management
Constant
Logof Assets
LeverageRatio
to Assets
CapitalExpenditures
GroupControlRights%
Non-Mgmt.
0.30
789
0.37
361
0.30
789
(1)
(2)
(3)
(4)
2.567
2.600
2.787
2.829
(0.00)
(0.00)
(0.00)
-0.123
(0.00)
-0.381
(0.05)
0.052
(0.88)
0.394*
(0.01)
-0.127
(0.00)
-0.381
(0.05)
0.053
(0.88)
0.343
(0.08)
-0.073
(0.71)
-0.122
(0.00)
-0.401
(0.04)
0.021
(0.95)
Mgmt.GroupControlRights%
Dummyif Mgmt.Groupis notthe LargestBlockholder
(0.00)
-0.125
(0.00)
-0.401
(0.04)
-0.001
(0.98)
0.221**
(0.00)
Dummyif Mgmt.GroupControlsbetween5%and
20%and is the LargestBlockholder
Dummyif Mgmt.GroupControlsbetween5%and
20%and is notthe LargestBlockholder
Dummyif Mgmt.GroupControlsabove 20%and
is the LargestBlockholder
Adj.R2
No. of Obs.
-0.037t
(0.01)
0.30
621
0.30
789
0.29
789
0.30
789
-0.356
(0.00)
-0.093
(0.48)
-0.218*
(0.00)
0.30
789
Regressionanalysisof the dependentvariableTobin's0 on categories of managementgroupownershipand controls
estimatedon a subsampleof countrieswithlowshareholderprotectionas measuredby Antidirector
Rightsand Ruleof
Law. Antidirector
Rightsvalues rangefromzero to five and are takenfromTable2 of LLSV(1998). Ruleof Lawvalues
range fromzero to 10 and are taken fromTable5 of LLSV(1998). The low protectionsubsample used in all models
includescountriesthatscore at or belowfouron the Antidirector
Rightsmeasureand at or belowseven on the Ruleof Law
measure.Allvariableshave been definedpreviouslyinTables1-3. InpanelA, Model(5) is estimatedon the subsampleof
firmsforwhichmanagementgroupcash flowrightscan be established.Allregressionsincludecountryand industryfixed
effects (coefficientsnotreported).Industrygroupingsare based on Campbell(1996). Thep-valueof the t-testof equality
of each coefficient to zero is reported in parentheses. ***,**, *, and t indicate that an ownership coefficient is statistically
different from that for the high protection subsample at the 1%, 5%, 10%, and 15% levels, respectively. Significance levels
are based on full-sample regressions with interactions for all coefficients.
Lins 177
non-managementand managementcontrolrights and again shows that only nonmanagementcontrolrightsarerelatedto value. The coefficientof 0.343 in the low
protectionsubsampleis slightlymorepositive thanthatfor the full sample,butthe
differencebetweenhigh and low protectionsamplesis not significant.These tests
provide weak evidence that increases in the percentageof control held by nonmanagementblockholdersare more positively relatedto value when shareholder
protectionis low.
I next test the effect of a controllingblock held by a non-managemententity
and the results are much strongerthan those for the overall sample. Model (3)
of panel B, Table4 reportsa positive coefficientof 0.221 on the controllingnonmanagementblockholderdummyin low shareholderprotectioncountries,which
is differentfrom the high protectionsubsampleat the 3% significancelevel. This
model supportsthe hypothesisthat the internalgovernanceprovidedby controlling non-managementblockholdersmattersmore when externalshareholderprotection mechanismsare relativelyweak.
Finally, model (4) investigateswhetherthe interactionsbetween large nonmanagementblockholdersand managerialcontrol in the 5% to 20% and above
20% ranges have a differentimpacton firmvalue when shareholderprotectionis
lower. The coefficientson managementcontrolin both the 5% to 20% and above
20% ranges when managementis also the largestblockholderare more negative
in the low shareholderprotectionsubsample.However,the differencebetweenthe
low and high protectionsubsamplesis significantfor only one of the coefficients,
so it is hardto conclude much from this model.
Summing up, the low shareholderprotectionsubsampletests conductedin
Table4 containtwo importantfindings. Whereexternalshareholderprotectionis
relatively weak, the relationbetween a separationof managementcontrolrights
and cash flow rights and firm value is more negative and the relationbetween a
controllingnon-managementblockholderand firm value is more positive. These
results are consistent with the hypothesisthat potentialmanagerialagency problems arereflectedin lower firmvalues when externalgovernancemechanismsare
least effective. These results are also consistent with the idea that large nonmanagementblockholdersprovide minority shareholderswith an even greater
monitoringbenefit when shareholderprotectionis weak. One caveat about my
conclusions on the importanceof shareholderprotectionis that I cannotrule out
the possibility that these results are driven by other variables correlatedwith
shareholderprotection, such as corruption,financial market development, and
GDP,ratherthan shareholderprotectionitself.
IV. RobustnessTests
A. Endogeneity
of Ownership
If ownershipand value are endogenously determined,then cross-sectional
regressions that indicate a relation between ownershipvariablesand firm value
cannot be used to make inferences about the causality of the relation. For instance, the negativerelationbetween managementgroup control in excess of its
proportionalcash flow and firm value could indicate that firm values are lower
178
Journalof Financialand QuantitativeAnalysis
as a result of the market'sexpectationof costly agency problems. However,it is
also plausiblethatmanagerswill increasetheir separationof cash flow rights and
controlrights if they want to maintaintheir control,but have knowledge that the
cash flows of their firm will be lower in the future. In this case, expected poor
performancecauses a higher separationof cash flow and control rights, rather
than the other way around. Similarly,regressionsthat show a positive relation
between large non-managementblockholdersand firm value could indicate that
monitoringof managersby large externalblockholderslessens actualor expected
managerialagency problems. Conversely,it could be the case that high firm values lead to increasedownershipby these blockholders(Rouwenhorst(1999) and
Chui, Titman,and Wei (2000)).
It is difficultto disentangleendogeneity and causalityproblemsin orderto
draw inferences on whethera firm's ownershipstructureaffects its value (Lemmon and Lins (2003)). Because I lack time-series data on ownershipstructures,
I cannottest whetherchanges in ownershiprelate to changes in firm value.23 Instead,I model the endogeneitywithin a cross-sectionalframework(e.g., Demsetz
andLehn (1985), LodererandMartin(1997), Cho (1998), Himmelberg,Hubbard,
and Palia (1999), and Demsetz and Villalonga(2001)).
Table5 reportsthe coefficientson two-stageleast squares(2SLS) regressions
in which the structuralmodel contains the valuationequationand the first-stage
model contains an ownershipequation. While a 2SLS estimationprocedureallows for endogeneitybetween Q and ownership, one shortcomingof this technique is thatit requiresthe identificationof some numberof exogenous variables
thatplausiblyaffect only value or ownership,but not both. In selecting my equation specifications,I follow the models of Demsetz and Villalonga (2001) since
these models incorporatea range of variablesused in prior2SLS ownershipand
value studies. My models use managementcash flow rights leverageand the percentage of non-managementgroup control rights as the ownershipvariables of
interest. I select these relatively simple ownershipvariablessince they need to
be both related to valuation and plausibly determinedby a set of independent
variables.
The valuationequationhas Tobin's Q as the dependentvariable,an ownerof interest,and capitalexpendituresto assets, leverage, and country
variable
ship
and industrydummies as controls. The specificationof my valuationequation
matchesmy previouslyreportedOLS regressions,except that firm size is not included. The ownershipequationshave the ownershipvariablefrom the valuation
equationas the dependentvariable,Tobin's Q as the simultaneouslydetermined
variable,and controls. I include countrydummies and leverage as common controls across the valuationand ownershipequations. LLS (1999) show that ownership structuresdiffer substantiallyacross countries. Leverage is included in
the ownershipequationsto reflect the possibility that creditorscan act as exter231 conductone(unreported)
time-seriestestthatregressesTobin'sQ valuesforfiscalyear1996on
andcontrols.
variablesfor 1996ownership,
variables,whichactas instrumental
my 1995ownership
andcontrolwhentheyexpecttheir
of theirownership
If managersareableto increasetheseparation
firmto performpoorlyin the future,thenone wouldexpecta morenegativerelationbetweenpast
andcurrentfirmvalue. I findthe oppositeresult-1996 firmvaluesare still
ownershipseparation
negatively and significantlyrelatedto 1995 managementcash flow rights leverage, but the magnitude
of thenegativerelationis less severe.
Lins
179
TABLE
5
of
Least
Estimation
Two-Stage
Ownershipand FirmValuein EmergingMarkets
Squares
Structural
Model
FirstStage
Regression
Structural
Model
FirstStage
Regression
DependentVariable
Mgmt.Cash FlowRightsLeverage
Tobin's0
Mgmt.Cash
FlowRights
Leverage
Tobin's0
Non-Mgmt.
GroupControl
Rights%
(1)
(2)
(3)
(4)
-0.462
(0.01)
Non-Mgmt.GroupControlRights%
Mgmt.GroupControlRights%
to Assets
CapitalExpenditures
LeverageRatio
CountryDummies
IndustryDummies
Tobin's0
0.262
(0.52)
-0.466
(0.09)
Yes
Yes
Logof Assets
-0.131
(0.83)
Yes
No
0.005
(0.99)
0.101
(0.13)
0.245
(0.05)
0.016
(0.86)
-0.015
(0.94)
-0.263
(0.12)
Yes
Yes
0.771
(0.81)
Yes
No
0.404
(0.00)
0.093
(0.15)
Beta
-0.182
-0.090
Alpha
(0.18)
-0.142
(0.01)
830
(0.61)
-0.058
(0.45)
1057
No. of Obs.
830
1057
Two-stageleast squares analysis of the dependent variableTobin's0 on categories of managementownership,nonmanagementownership,and controls.Alphaand Betavalues are obtainedfromWorldscope.These are computed(by
Worldscope)usingbetween23 and 35 consecutivemonth-endpercentagepricechanges relativeto a localmarketindex.
Allothervariablesare describedinTables1 and 2. Industrydummyvariablesare based on Campbell(1996). Thep-value
of the t-testof equalityof each coefficientto zero is reportedin parentheses.
nal monitors,which might affect the likelihoodof observingownershipstructures
that facilitate managerialentrenchment.Firm size is in the ownershipequation
to control for the possibility that managersof large firms will use pyramidsto
obtain their controlrights in orderto conserve on cash or that non-management
blockholderspreferownershippositions in large firms.
I also include Alpha and Beta values from Worldscope,which are computed
using between 23 and 35 consecutive month-endpercentageprice changes relative to a local marketindex. To the extent that Alpha, which measures past
"excess"returns,is a proxy for futureexpected excess returns,higherAlpha values should increase the willingness of both managersand non-managersto hold
cash flow rightsin a firm. As such, Alpha shouldbe negativelyrelatedto management cash flow rights leverage. Demsetz and Villalonga(2001) arguethathigher
marketrisk (Beta) indicates betterprospects for managersto profit from inside
informationand for outside shareholdersto engage in profitablemonitoringof
managers. Thus, Beta should be positively relatedto the cash flow rightsblockholdings of both managersand outsidersand negatively relatedto management
cash flow rightsleverage.Inclusionof Alpha andBeta reducesthe sample size by
about25%.
180
Journalof Financialand QuantitativeAnalysis
The Table 5 2SLS regressionsprovide mixed evidence on the causality of
results. The first valuation equation (equation (1)) shows that, conOLS
my
for
trolling
simultaneity,firm values are still significantlylower when managementhas controlin excess of its proportionalownership.The ownershipequation
(equation(2)) indicatesthata firm'sQ value does not influencemanagementcash
flow rights leverage. Thus, these results are consistentwith an interpretationthat
managementcash flow rights leverage reduces firm value. Equation(3) shows,
as before, that firm values are higher as the control rights of non-management
blockholdersincrease. However,equation(4) indicatesthat there is simultaneity
between Q and non-managementownership,with non-managementblockholders
more likely to own controlrightsin firmswith higherQ values. Forthis reason,it
is best to interpretthe resultsof the OLS regressionmodels with non-management
blockholdersas demonstratinga relation,but not necessarilycausation,between
non-managementblockholdersand firmvalue.
B. Measurement
Issues
The process of constructingultimate ownershipdata for emerging market
firms requiresdata sources that capturethe full breadthof any overlap among
family members,othercompanies,and otherinstitutions.I follow the convention
of La Portaet al. (1999) by matchingmanagersand family based on family surname, but this match will obviously be imperfectwhen family membersdo not
sharethe same surname.Similarly,it is plausible that I omittedfirms due to my
inability to obtain data on their direct blockholdingswhen such data do, in fact,
exist. It is not clear whetherthese potentialmisclassificationswill cause a bias in
the sample or will simply add noise to the ownershipmeasures.
Forrobustness,I comparemy datawith the ownershipstructuredatafor East
Asian firms used in the Claessens et al. (2000) study and for Portuguesefirms
used in the Faccio and Lang (2002) study.24I find a very strong and significant
correlation,but not a perfect correlation. To see if these differences affect my
results, I replace my ownershipvalues with those of Claessens et al. and Faccio
and Lang where they are different, and re-estimatemy models. I find that all
of my results are similarin both magnitudeand significancewhen I incorporate
datacompiled by these otherauthors.As such, my results appearto be robustto
measurementissues relatingto ownershipstructureclassification.
I next conductrobustnesstests using two alternatemeasuresof firm performance as dependentvariables, since the suitability of Tobin's Q as a measure
of firm value may be compromisedby differencesin accountingpracticesor reportingacross the countriesin my sample. I use the market-to-bookequity ratio,
defined as the marketvalue of equity divided by the book value of equity, and
operatingreturnon assets, definedas operatingincome deflatedby assets. These
performancemeasuresare also censored at the first and 99th percentilesto alleviate the influence of outliers. Overall, I find that all of the previous ownership
24Uniquecoding strategiesused during data collection limit my ability to fully incorporatesome
of these data. Specifically, I cannot use the Claessens et al. data in my tests of managementgroup
control between 5% and 20% because they code the control rights of the second throughfifth largest
blockholdersin incrementsof five percentagepoints, roundingdown (my variablesuse one percentage
point increments).
Lins 181
and value relations hold using the market-to-bookequity value measure, while
some, but not all, of these relationshold when I specify operatingreturnas the
performancemetric.
I also controlfor the possibility that majority-controlledfirms, in which no
takeoveris possible, might accountfor some of my findings since managersare,
by far, the largestblockholdersin emergingmarkets. I re-estimatemy previous
models, excludingfirmswhen a single blockholderholds a majorityof the firm's
control rights, and find that all results continue to hold. Finally, I performall
robustnesstests using the low shareholderprotectionsubsampleand find thatmy
previousresults still obtain.
V. Conclusion
This paper investigates the relation between ownership structureand firm
value across 1433 firmsfrom 18 emergingmarkets.I departfrom previouscrosscountryresearch on ownershipand valuationby explicitly examining management and family ownershipacross all of my sample firmsand whetherlargenonmanagementblockholdersprovidemonitoring.I also investigatewhetherthe relation between ownershipand value dependsuponthe level of externalshareholder
protectionin a country.
This papercontainsseveralinterestingresults. First,I find thatmanagement
groupcontrolin excess of its proportionalownershipis negativelyrelatedto Tobin's Q in emergingmarkets.Managerialcontrolin the 5% to 20% rangeis also
negatively relatedto Q. These results indicatethat investorsdiscountfirms with
potentiallysevere managerialagency problemsresultingfrom misalignedincentives and managerialentrenchment.Second, I provide evidence that large nonmanagementblockholders can mitigate the valuation discount associated with
these expected agency problems. Managerialcontrol in the 5% to 20% range
is only associated with lower firm values when the managementgroup is also
the largest blockholder.When a largernon-managementblockholderis present,
managerialcontrol in the 5% to 20% range does not affect firm value. Regressions also show that large non-managementblockholdingsare positively related
to Tobin'sQ values.
Next, I examine whetherthe relationbetween ownershipand value depends
on the level of shareholderprotectionin a country. When managershave control rights that exceed theirproportionalownership,firm values are significantly
lower in countrieswith low shareholderprotection. I also find that the relation
betweenlargenon-managementblockholdersandvalue is significantlymorepositive in low protectioncountries.These findingssuggest thatexternalshareholder
protectionmechanismsplay a role in restrainingmanagerialagency costs. They
also indicatethatlarge non-managementblockholdersmay act as a substitutefor
missing institutionalgovernancemechanisms.
Interestingtopics for futureownershipstructureresearchinclude identifying
the factors that drive the presence of large non-managementblockholdersand
studyingwhy LatinAmericanfirmsuse non-votingequity structuresmuch more
frequentlythando otheremergingmarketfirms.
182
Journal of Financial and Quantitative Analysis
APPENDIX
Sources of ControlRightsand Cash FlowRightsOwnershipData
PanelA. OverallDataSources Used FrequentlyforAllCountries
UltimateOwnershipData
Lexis-Nexis,Worldscope,ExtelCards,GlobalData Direct(FISonline),HoppenstedtAffiliationsand CorporateStructures,Nelson'sPublicCompanyProfiles,Hoover'sCompany
German
Capsules, ELCLargestCompanies,ICCFinancialAnalysisreports,Creditreform
Swiss Companies,WhoOwnsWhom,company-specificwebCompanies,Creditreform
sites
Non-Voting
EquityShares
Datastream, Worldscope,
GlobalDataDirect
PanelB. DirectOwnershipDataSourcesand AdditionalUltimateOwnershipDataSourcesper Country
UltimateOwnershipData(and non-votingsharedata)
DirectOwnershipData
Country
ArgentinaCH; BrazilCH; LatinAmericanCompaniesHandbook,
1995, Moody'sInvestorsService, NY, NY;Hoover'sMaster List
of LatinAmericanCompanies 1996-1997, The Reference Press,
Austin,TX
BrazilCH;ArgentinaCH; LatinAmericanCompaniesHandbook,
1995; Hoover'sMasterList of LatinAmericanCompanies 19961997
ArgentinaCH; BrazilCH; LatinAmericanCompaniesHandbook,
1995; Hoover'sMasterList of LatinAmericanCompanies 19961997
Czech StockMarketGuide;WorldBankdatafiles
Argentina
ArgentinaCompanyHandbook
(CH),1997, Hoover'sInc.,Austin,
TX
Brazil
BrazilCompanyHandbook,1997,
Hoover'sInc.,Austin,TX
Chile
Worldscope
Czech Rep.
Czech StockMarketGuide,1996,
AspektKilcullens.r.o.,Prague,
Czech Republic
ThorntonGuide to Asian Compa- ThorntonGuide;AsianCH;JapanCompanyHandbook,1997,Toyo
nies, 1996, EdinburghFinancial KeizaiInc.,Tokyo,Japan
PublishingAsia, HongKong
ThorntonGuide;AsianCH;JapanCH
IndonesianCapital MarketDirec- IndonesianDirectory;
tory, 1993, Institutefor Economic
and Financial Research, Jakarta
StockExchange,Jakarta
GlobalData Direct,FinancialInformationServicesOnline
Thornton
Guideto AsianCompanies ThorntonGuide;AsianCH;JapanCH
GlobalDataDirect
ArgentinaCH; BrazilCH; LatinAmericanCompaniesHandbook,
1995; Hoover'sMasterListof LatinAmericanCompanies 19961997
InvestmentsGuide,1997, Research InvestmentsGuide-PhilippineStock Exchange,ThorntonGuide;
Department,PhilippineStock Ex- AsianCH;JapanCH
change, Manila
HongKong
Indonesia
Israel
Malaysia
Peru
Philippines
Portugal
Singapore
So. Africa
So. Korea
SriLanka
Taiwan
Thailand
Worldscope
Thornton
Guideto AsianCompanies ThorntonGuide;AsianCH;JapanCH
GlobalDataDirect
ThorntonGuide;AsianCH;JapanCH
Worldscope
GlobalDataDirect
Thornton
Guideto AsianCompanies ThorntonGuide;AsianCH;JapanCH
Thornton
Guideto AsianCompanies ThorntonGuide;AsianCH;JapanCH;MFCInvestmentHandbook,
1996, MutualFundPublicCompanyLimited,Bangkok
Turkey
Worldscope
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