Moderating Effect of Economic Instability in the Relationship between Concentration of Control and Market Value: Empirical Evidence in Latin America

This paper investigates the moderating effect of economic instability in the relationship between the concentration of control and market value of firms. For this purpose, we built an unbalanced panel dataset composed of 341 Latin American companies from six countries: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. The results of the dynamic models, estimated using the systemic generalized method of moments, indicate, in general, that concentration of control only reduces the market value of firms in environments with high economic instability. Thus, this study provides empirical evidence that times of economic instability encourage controlling shareholders to act even more strongly in their own interests, which may result in the expropriation of the wealth of smaller shareholders.