Carlos Pombo

Family Firms and Debt: Risk Aversion versus Risk of Losing Control

This study examines the effect of family management, ownership, and control on capital structure for 523 Colombian firms between 1996 and 2006. The study finds that debt levels tend to be lower for younger firms when the founder or one of his heirs acts as manager, but trends higher as the firm ages. When family involvement derives from direct and indirect ownership, the family–debt relationship is positive, consistent with the idea that external supervision accompanies higher debt levels and reduces the risk of losing control. When families are present on the board of directors (but are not in management), debt levels tend to be lower, suggesting that family directors are more risk-averse. The results stress the tradeoff between two distinct motivations that determine the capital structure of family firms: risk aversion pushes firms toward lower debt levels, but the need to finance growth without losing control makes family firms to prefer higher debt levels.

Privatization in Colombia: A Plant Performance Analysis

El articulo describe el programa de privatizacion en el sector real de la economia Colombiana durante los anos noventa y ubica esta politica en un contexto de desregulacion de mercados y promocion de la inversion privada en la oferta de infraestructura publica y servicios publicos domiciliarios. El articulo evalua el programa de privatizacion en los sectores manufacturero y de generacion de energia electrica. Se hacen mediciones ex - post y analisis econometrico del desempeno de las firmas privatizadas. En el sector manufacturero la muestra analizada esta compuesta por 30 firmas manufactureras de gran tamano, donde el Instituto de Fomento Industrial era socio fundador. Los principales resultados sugieren que estas firmas mantuvieron un comportamiento pro - ciclico relativo a su principal competidor privado y desestimaron planes drasticos de reestructuracion operativa. Para el grupo de firmas de generacion de energia el articulo estudia el impacto de la reforma regulatoria en el proceso de entrada al mercado, estructura de propiedad, competencia de mercado y eficiencia productiva. La medicion de eficiencia productiva usa la tecnica de Data Envelope Analisis para 33 plantas que representan el 85% de la capacidad instalada en la generacion termica de energia electrica. La muestra esta compuesta por plantas que estaban en funcionamiento antes de la reforma y las entrantes que comenzaron su operacion comercial despues de la reforma. Los resultados sugieren que los niveles de evidencia en la generacion termica a mejorado despues de la reforma y que la politica regulatoria ha tenido un efecto positivo en la eficiencia productiva.This paper describes the privatization program carried out in the productive sector of the Colombian economy during the 1990s. It evaluates privatization within the policy context of general market deregulation and the promotion of private investment in the provision of public infrastructure and domiciliary public services. Two case studies are explored: the manufacturing and power sectors. The paper follows the ex-post measuring and econometric analysis of a set of operative and restructuring performance indicators for the privatized firms. For manufacturing, the study sample consists of 30 large manufacturing firms of which the Instituto de Fomento Industrial was the founding or supporting partner. The main findings suggest that those firms followed pro-cyclical behavior relative to their private competitors and undertook tight plant operative restructuring. For the power sector, the paper studies the impact of regulatory reform on market entry, ownership structure, market competition, and productive efficiency of the privatized holdings. The results suggest that privatization and entry competition in power generation have had a positive effect on the privatized utilities’ efficiency and investment. With respect to thermal generation, the measurement of productive efficiency follows a data envelope analysis technique based on a sample of 33 plants that account for 85% of the installed capacity. The sample units are plants that were active before the reform and new entrants that started business operations after the reform. The main outcome shows that efficiency scores have improved after the reform and that regulatory policy has had a positive effect on productive efficiency.

Family Involvement and Dividend Policy in Closely Held Firms

This article examines the effects of family involvement on dividend policy in closely held firms that face agency problems involving majority-minority shareholders. We argue that minority shareholders press for dividends when they perceive situations fostering wealth expropriation. Looking at 458 Colombian companies, we find that family involvement in management does not impact dividend policy; family involvement in both ownership and control through pyramids impacts dividend policy negatively; family involvement in control through disproportionate board representation affects dividend policy positively. Thus, family influence on agency problems, and hence on dividend policy as a mitigating mechanism, varies depending on family involvement.

The Role of Family Involvement on CEO Turnover: Evidence from Colombian Family Firms

Manuscript Type Empirical Research Question/Issue We analyze CEO turnover in closely held firms with some level of ownership dispersion in a context of low investor protection. In particular, we examine the impact of family involvement on CEO turnover and CEO turnover/performance sensitivity. We argue that family involvement in management, ownership, and control has both a direct effect on CEO turnover from the family presence itself, and a moderating effect over CEO turnover/performance sensitivity attributable to the agency tensions between majority and minority shareholders (whether other family blocks or non-family shareholders). Research Findings/Insights Using data from 1996–2006 for 523 Colombian firms, we find direct and moderating effects, depending on the type of family involvement. Family involvement in management and boards reduces CEO turnover, but family involvement in ownership increases it. Regarding moderating effects, family involvement in ownership reduces CEO turnover/performance sensitivity, while the opposite occurs with family directors. Theoretical/Academic Implications Our results show that closely held firms in emerging markets exhibit a strong negative CEO turnover/performance sensitivity, which is a somewhat counterintuitive result, and also contribute to a better understanding of agency conflicts within family firms by highlighting the different ways families affect CEO turnover. Practitioner/Policy Implications Our findings suggest that even benevolently entrenched family CEOs are not immune to poor financial performance. Families that are majority or controlling shareholders may support CEOs even when the firm performs poorly because of potential benefits from control. Family boards are very sensitive to financial performance even when the CEO is a family member.

Corporate Governance and Firm Valuation in Colombia

This paper studies the separation of ownership and control of 108 listed companies in Colombia from 1996 to 2002, finding that voting rights are greater than cash flow rights because of indirect ownership across firms. The paper also examines the association of various ownership and control measures and separation ratios with a firm’s value and performance for the same sample of companies that traded their stock from 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 this relationship is not monotonic. The paper further reports results from a 2004 survey which suggests that Colombian firms have been slow to improve their corporate governance practices.

Regulatory reform in Colombia's electric utilities

This paper analyses the porcess of regulatory reform in Colombia´s electric supply industry durint the nineties. In order to provide a compehensive view about the reform´s motivations the first part of the essay describes the key features in the development of the power sector, the institutional structure and the economic performance since the seventies that end up in a general power shortage in 1992. Afterwards, it discuses based on the evolution of some technical indicators the causes of the 1992 power cirsis. The second part emphasizes on the regulatory theory beneath the reform, the privatization process, the new regulatory institutions, and the evolution of the electric spot market. *********************************************************************** Este documento analiza el proceso de reforma regulatioria que sobre la industria de la oferte de energia tuvo lugar en Colombia en la ultima decada del siglo pasado. Para exponer las motivaciones de dicha reforma, la primera parte del documento describe los elementos claves del desarrollo del sector, su estructura institucional y comportamiento economico desde inicios de 1970 en adelante, hasta terminar en la crisis energetica de 1992. Posteriormente, con base en algunos indicadores tecnicos se discuten las causas de dicha crisis. La segunda parte del ensayo hace enfasis en la teoria regulatoria subyacente a la reforma, el proceso de privatizacion , las nuevas instituciones regulatorias y la evolucion del mercado de oferta electrica.

Stock liquidity and second blockholder as drivers of corporate value: Evidence from Latin America

Abstract This paper examines the relationship between firm value and blockholders in Latin America. Econometric results for a comprehensive data set of more than 550 firms listed in the six largest stock markets of the region support a positive effect of variables measuring the existence, contestability, dispersion and identity of blockholder on performance (Tobins Q) only for highly liquid stocks. The identity of the second largest blockholder (family, foreign, financial or the State) emerges as critical for such effects. The study supports that the voice and exit models are complementary rather than substitute mechanisms for firm corporate governance.

Editorial note on desk rejection policy

This short note explains to contributing authors the concept of “desk rejection” as well as describing our recent experience with it since 2013, the year in which Academia became one of Emerald Group Publishing’s management and business journals. So called “desk rejection” is the first screening that editors undertake of all submitted papers for review and publication. Today, desk rejection constitutes more that 50 percent of all rejections made on Academia. Desk rejection is based on specific criteria focussing on how well the paper fits the journal’s editorial policy, the significance of the contribution, originality in the analyses and the quality of the data.

Do institutional blockholders influence corporate investment? Evidence from emerging markets

This paper examines the relation between firm investment ratios and institutional blockholder ownership for a sample of 6,300 publicly traded firms of 16 large emerging markets for the 2005-2014 period. Results show that independent, long-term, and local institutional investors boost investment ratios, consistent with the monitoring role and blockholder voice intervention hypotheses. The presence of institutional blockholders, regardless their monitoring involvement, reduces firm cash flow sensitivity ratios and thus decreasing firms’ financial constraints.

Do institutional investors unbind firm financial constraints? Evidence from emerging markets

Using firm-level information for 11 large emerging economies for the 2003-2014 period, this article analyses the impact of firm investment ratio depending on the presence of institutional ownership and the effects of institutional investor heterogeneity on firm financial constraints. Results show that the presence of institutional ownership reduces firm cash flow sensitivity for restricted samples using size and the Kaplan and Zingales index. Investor heterogeneity regressions show that independent and foreign institutional investors reduce firm financial constraints explained by direct investor activism, lower monitoring costs and better corporate governance in particular across small and medium-size firms.