Changing the Paradigm of Stock Ownership from Concentrated Towards Dispersed Ownership? Evidence from Brazil and Consequences for Emerging Countries
Abstract: This paper analyzes micro-level dynamics of changes in ownership structures. It investigates changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance the theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership. Commentators argue that the Brazilian capital markets are finally taking off. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has recently seen an attempted hostile takeover. This paper discusses these current developments and analyzes ownership structures of companies listed on Bovespa’s listing segments. It provides the first evidence of the decline of ownership concentration in Brazilian corporations. However, dispersed ownership is mainly found in Novo Mercado, the listing segment that requires the one-share-one-vote rule. This paper, then, investigates firms’ migration patterns, and finds that eighty-five percent of Novo Mercado’s firms are “new entrant” firms. Traditional firms have mostly migrated to Level 1, the least stringent corporate governance segment. Thus, there are two corporate worlds in Brazilian capital markets: new corporations that adopt proactive corporate governance patterns, and established corporations that retain their main patterns of corporate governance or ownership structure.
