Corporate Valuation and Governance: Evidence from Colombia

Luis Gutiérrez and Carlos Pombo

No 3216, Research Department Publications from Inter-American Development Bank, Research Department

Abstract: This paper examines for the first time the association of different ownership and control measures and separation ratios with a firm`s value and performance for 108 non-financial firms that traded their stock during the period 1998 to 2002. Large blockholders were found to exert a positive influence upon a firm`s valuation and performance, which validates the positive monitoring approach of large shareholders, but it was also found that this relationship is not monotonic, implying that when separation of control and ownership tends to increase, a negative effect is exerted on firm`s valuation. This paper also reports the first estimates of a survey of corporate governance practices conducted in 2004 for 43 Colombian non-financial companies. The corporate governance index`s (CGI) scores suggest that implementation of good governance in Colombian firms has been slow and poor, as measured by an index average that is below half the maximum attainable value. Regrettably, it was not possible to find any support to recent theories that predict a positive association between good governance practices -as measured by the CGI - and performance. At most, there exists a positive relationship for the sub-index, but the results were not statistically significant in general.

Date: 2005-11
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Citations: View citations in EconPapers (8)

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Working Paper: Corporate Valuation and Governance: Evidence from Colombia (2005)
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