The Dominance of Pyramidal Business Groups in Latin America Persists

Abstract

This article provides insight on the historically dominant ownership structures in Latin America known as grupos. Unlike the widely-held standalone firm, the corporate governance dilemma in these business groups often arises between the concentrated ownership and outsiders from the lack of minority shareholder rights coupled with self-dealing schemes of the dominant controlling owner. The more recent stock market reforms of the MILA and BOVESPA exchanges, suggest that the long-term strategy for Latin American markets is not to expect these dominant ownership structures to change, but instead to focus attention towards understanding the corporate governance incentives that motivate business groups’ behaviors.