Getting to Know the Neighbors: Grupos in Mexico.
For both theoretical and practical reasons, Latin American business groups--often shortened to groups or grupos--merit greater research attention. In 1999, Latin America overtook Asia, $97 billion to $84 billion, as the number one destination in the developing world for foreign direct investment (FDI) flows. Although multinational corporations (MNCs) have a variety of entry mode options with their Latin American investments, they will likely end up forming an alliance with a branch of a business group if they join forces with a local private sector partner. Moreover, if an MNC faces local, indigenous competition (especially in capital-intensive industries); chances are its rival will again be a company belonging to a business group. Table 1 provides a summary of the characteristics of the largest Latin American corporations in selected countries. If, as Khanna and Palepu (2000b) maintain, grupos dominate most if not all Latin American economies, we would argue that understanding the characteristics of these groups is as important for those competing in Latin America as it is for MNCs doing business in Japan and South Korea to understand the structure and dynamics of the keiretsu and the chaebol.
For the United States, Mexico and its grupos have become particularly important. These countries are joined by a 2,000-mile-long border as well as a robust network of cross-border trade, investment, and bilateral agreements. Always strong, economic activity between the U.S. and Mexico has grown dramatically since the implementation of NAFTA (North American Free Trade Agreement) in 1994. In 1999, total U.S./Mexican trade reached $196.6 billion, and Mexico displaced Japan as the U.S.'s second largest trading partner. From 1994 to 2000, Mexico received more than $76 billion in new FDI, of which U.S. firms directly accounted for more than 60 percent.
With a few relatively recent exceptions, the mainstream international management literature has largely ignored the entire topic of Latin American business groups. Fortunately, scholars from such academic disciplines as history, economics, finance, anthropology, and political science have produced a relatively small but insightful body of research about this organizational form. Drawing from these and other disciplinary perspectives, in the pages that follow we provide a window into the structure and functioning of grupos.
WHAT IS A BUSINESS GROUP?
Though seemingly a simple question, there is no all-encompassing definition of what constitutes a business group. Khanna and Rivkin (2001) maintain that "a business group is a set of firms which, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action." In contrast, Strachan (1979) defines a group as "a long-term association of a great diversity of firms and the men who own and manage these firms." According to Strachan, business groups have three primary characteristics: (1) diversity, typically having businesses in many different sectors; (2) pluralistic composition, meaning that groups are generally composed of more than just one family; and (3) a fiduciary atmosphere, in which the loyalty and trust normally associated with family or kinship groups are common.
Leff (1978) offers yet another complementary definition: 'The group is a multi-company firm which transacts in different markets but which does so under common entrepreneurial and financial control." Leff states that groups typically draw capital and high-level managers from more than a single family, that large groups will establish banks and other financial intermediaries to tap capital from sources outside the immediate members of the group, and that groups usually exercise a considerable degree of market power in the sectors where they operate.
A number of tentative explanations have been given for why groups are so common in developing countries. Strachan argues that the principal function of business groups is financial intermediation--the efficient transfer of investment funds from those group members with excess savings to other group members with net capital needs. Khanna and Palepu (1997, 1999) provide a broader explanation for group formation and survival, arguing that developing economies are characterized by market failure. Large, diversified groups can add value by imitating the functions of several institutions (capital, labor, and product markets, government regulation, contract enforcement) that are present in advanced countries. For example, Khanna and Palepu state that many governments in emerging markets continue to use highly intrusive approaches to business regulation. Moreover, government bureaucrats have a great deal of discretion in how regulations are interpreted and enforced. In contrast to smaller and/or unaffiliated compani es, groups may have the experience, size, and political connections necessary to navigate efficiently through these regulatory mazes. Khanna and Palepu (2000) provide empirical evidence that supports many of their arguments. For example, their results indicate that in both Chile and India, affiliates of the most diversified business groups outperformed unaffiliated companies. However, in another empirical test, Khanna and Rivkin found that business group affiliates earned higher accounting profits than comparable unaffiliated companies in India, Indonesia, Taiwan, Israel, South Africa, and Peru, but lower profits in Argentina, Chile, and the Philippines, and roughly equivalent profits in Brazil, Korea, Mexico, Thailand, and Turkey.
In addition to the general question of why business groups exist, another interesting debate is whether they are an efficient or merely an intermediate organizational form that will disappear over time as developing countries build the institutions currently present only in advanced economies. Chandler (1990) argues that when technology and market demands create substantial opportunities for scale and/or scope economies, business groups may need to adopt a multidivisional form and use professional rather than family managers to guide the consolidated firm. However, Granovetter (1994) argues there is little evidence that groups are modifying their structure or behavior according to Chandler's predictions.
The limited empirical evidence available tends to indicate that the advantages of diversified business groups may deteriorate as more efficient institutions are built and governments open up their borders to global competition. Guillen (2000) found that "when governments privilege certain entrepreneurs or firms and restrict access by foreigners, they should expect no less than the growth of powerful business groups." However, when asymmetric foreign trade and investment conditions are reduced, the size and scope of groups may become a liability when forced to compete openly against foreign MNCs and focused local firms. Khanna and Palepu found that as Chile built more effective institutions from 1988 to 1996, the financial benefits of belonging to a group were reduced.
Even with these empirical findings, it would be a mistake to assume that Latin American business groups will be disappearing any time soon. In 1989, according to Berrios and Ferro (2000), 116 of the 500 largest firms in Latin America were government owned, 117 were subsidiaries of MNCs, and 267 were locally owned. In 1999, 35 firms were government owned, 198 were subsidiaries of MNCs, and 267 were locally owned. Many of these locally owned firms continue to be organized as business groups.
THE MEXICAN GROUPS
In this section, we focus on the structure and activities of Mexican business groups, especially those in Monterrey--the third largest city in Mexico and the birthplace and corporate headquarters of several of the country's largest groups, including Alfa, Cydsa, Cemex, Domos, Femsa, Gruma, Imsa, Proeza, Protexa, Savia, Villacero, and Vitro. The paragraphs that follow shed light on group activity in an effort to better understand their competitive strengths and weaknesses, their potential as joint venture partners for MNCs, and the evolving Mexican business culture. Our analysis focuses on two general topics: (1) the historical development of kinship networks within Mexican groups and its effect on their structure and competitive behavior; and (2) various issues concerning corporate governance.
Kinship Networks in Mexican Groups
Family ownership and control has long been one of the dominant characteristics of Latin American business groups. Tracing the development of extended kinship networks within and between grupos over the last 100 years or so can serve to illustrate just how deeply imbedded these networks are in the Mexican private sector. In a classic work, Saragoza (1988) detailed the development of industry in Monterrey from 1880 to 1940 and the emergence of the city's most prominent business family, the Garza Sadas.
By the 1870s, according to Medina and Arreola (1994 a, b), a successful Monterrey businessman named Jose Calderon had organized his various businesses into what was known as the "Casa de Calderon." Around that time, he recruited a promising young man named Isaac Garza. Wielding his business savvy as well as knowledge developed through formal training in Spain, Garza soon took over the accounting duties for the Calderon businesses. In the mid-1870s, Calderon married Francisca Muguerza, whose sister Carmen was already married to a lawyer named Francisco Sada. Isaac Garza later married Consuelo Sada Muguerza, a niece of Francisca. Working under the direction of the relatively elderly Calderon, the young trio of Garza, Francisco G. Sada (the son of Francisco and Carmen), and Jose Muguerza (Francisca's brother) worked to strengthen the businesses of the Casa de Calderon and establish their own firms. Several of today's major Mexican business groups, especially Alfa, Femsa, Vitro, and Cydsa, can trace their origin s to the entrepreneurial activities of these three individuals.
As noted by Strachan, one of the primary characteristics of business groups is pluralistic composition, which means they are generally composed of more than just one family. Even given the exceptional success of the Garza-SadaMuguerza partnership, the Monterrey groups were certainly no exception to this general rule. Saragoza identifies 11 elite families in the Monterrey area at the start of the twentieth century. In addition to the Garza Sadas, the list included the Armendaiz, Rivero, Hernadez, Milmo, Belden, Ferrara, Madero, and Zambrano families. Over just the period of 1890 to 1910, Saragoza identified 49 business start-ups in which two or more of these families collaborated. On average, five families were involved in each of the 49 new ventures. In fact, between 1900 and 1904, all 11 contributed capital leading to the establishment of a steel plant, a coal mine, and a glass factory.
Joint investments were not the only mechanism that brought together the Monterrey elite. It was also common for the offspring of the various families
to intermarry. Through this mechanism, the Garza, Sada, and Muguerza clan formed kinship linkages with the Zambrano, Madero, Hernandez, Gonzale Trevino and Ferrara families.
Based on the examples provided by a number of prominent individuals, a clear set of behavioral norms and an overriding ideology developed within Monterrey's leading entrepreneurial families. Perhaps the person who made the greatest contribution to this value set was Eugenio Garza Sada. Born in 1892, the son of Isaac and Consuelo had ample experience in the United States during his formative years. He earned his high school degree from a U.S. military academy before attending MIT. After graduating with a degree in civil engineering, he returned to Monterrey in 1917 and began working at Cerveceria Cuauhtemoc, the family-owned brewery where he was continuously employed in one capacity or another for 56 years. After working his way through various jobs, he eventually took over as president of what came to be known as the Grupo Monterrey.
Eugenio Garza Sada was known especially for his recognition of the importance of science and technology (he was the founder of the largest private university system in Mexico), his emphasis on hard work and saving, a clear distaste for the socialist ideology that frequently emanated from the federal government in Mexico City, and a well-developed sense of social responsibility. Rather than simply giving money to the poor, for example, he believed it was the responsibility of the Mexican business elite to create jobs. Eugenio Garza Sada served to popularize and reinforce the view that the Mexican private sector, not government or foreign capital, was capable of and responsible for Mexico's economic development. Given these values, it should come as little surprise that two of his favorite authors were the Nobel Laureate economist Milton Friedman and Ayn Rand, the founder of objectivism.
While the members of the Monterrey elite were able to establish a clear business ideology that was and continues to be largely consistent with the needs of modern industry, alternative models also emerged of how elite families (and the businesses they control) should function. In another classic work, Lomnitz and Perez-Lizaur (1987) conducted an extensive study of the Gomez family (not their real name), who were based in Mexico City. Using key informants in the family as well as secondary data, the researchers tracked the development and business success of the Gomez kinship network from 1820 to 1980. Their central thesis is that the grandfamily--defined as the three-generation family unit consisting of grandparents, parents, and children--is the basic meaningful unit of solidarity in Mexico. The principal characteristic of the businesses controlled by the Gomezes was their total integration with the family. Lomnitz and Perez-Lizaur found that Gomez entrepreneurs frequently "wasted valuable resources and ma de decisions against economic sense in order to gain ascendancy or to satisfy cravings for family sentiment and a feeling of belonging." Such actions included employing large numbers of relatives (they found 59 relatives working for or economically dependent on one successful entrepreneur), withdrawing considerable capital from family businesses for such activities as elaborate weddings and extensive foreign vacations, and refusing to engage in alliances with foreign MNCs (this would imply a loss of personal control and hence prestige within the grandfamily).
The Gomez enterprises were characterized by a number of additional "family-centric" management practices. Lomnitz and Perez-Lizaur found that a common characteristic of all Gomez firms was centralized control. The owner/manager ruled his company much like he did his family and expected to make all important decisions. Moreover, he would inevitably fill key managerial positions with his own offspring. His sons often started working as soon as possible, usually not even attending college. If his sons were not old enough,
he would turn to brothers, sons-in-law, nephews, or cousins. Once his sons came of age, the more distant relatives were often forced out of the core company but then given the capital and support necessary to set up their own businesses (often as suppliers or customers of the core family firm).
Given the lack of importance placed on formal education, technical ability was often under-appreciated, and individuals working in positions such as accounting and engineering rarely became personal de confianza (trustworthy personnel) unless they were relatives. Gomez entrepreneurs also preferred to own and control several medium-sized enterprises rather than one or two large, modern companies. This structure made it easier to leave each son a stand-alone business when the family patriarch passed away.
To summarize, what emerges from the historical literature is that there are least two models of how kinship networks influence the structure and operation of Mexican groups. For lack of better terms, we label these the Monterrey Model and the Gomez Model. As shown in Figure 1, these two models share some common characteristics. For example, Mexican groups have traditionally engaged in both related and unrelated diversification, and family ownership and control have been the rule rather than the exception. However, the two models strongly diverge on a number of key points. The Gomez enterprises are characterized primarily by the subordination of the needs of the group to the grandfamily and to achieving competitive advantage through privileged access to important actors in the Mexican system (other elite families, government decision makers, the Catholic Church). On the other hand, the Monterrey model represents a balance between the needs of the family and that of modern industry. With this "modified meritoc racy" model, it is common for family managers working in top positions in group firms to have advanced technical and/or managerial degrees from well-known universities in the United States or Europe, a commitment to and solid record of partnering with MNCs, a recognition of the opportunities and threats created by globalization, and a willingness to fully use skilled professional managers rather than family members in critical operating-level positions. These Monterrey model firms appear to be well positioned to compete in both the Mexican and international markets.
Corporate Governance and Mexican Groups
Shleifer and Vishny (1997) define corporate governance systems as "the collection of mechanisms through which providers of resources to the firm get their share of resources in return." Specific mechanisms that fall under the generic umbrella of corporate governance include the role of the board of directors, the rights of majority versus minority shareholders, company capital structure and financing sources, the disciplining role of the stock market, and agency relationships between providers of capital and company managers. Relatively little research has examined corporate governance structures in developing countries in general and Latin America in particular. However, La Porta and his colleagues (1998, 1999) have recently made key contributions in this area. Their published work goes a long way toward answering three important and interrelated questions about the current ownership structure and competitive behavior of Mexican groups:
1. Do elite families still control grupos today?
2. If families are still in control, how have they been able to finance business expansion while still maintaining their dominant position?
3. When MNCs and international investors partner with Mexican groups, what type of legal protection do they have if the alliance goes bad?
In response to the first question, La Porta et al. provide convincing evidence that elite families continue to maintain their hold on Mexico's largest firms. For example, they determined the ownership concentration (defined as that held by the three largest shareholders) of the 10 largest nonfinancial firms in 49 countries. Whereas concentration in the U.S. was .20 (the three largest stockholders on average held 20 percent of a firm's total stock), in Mexico the comparable figure was .64. In fact, ownership concentration in Mexican firms is the third highest in the entire sample.
In a closely related study, La Porta et al. compared and contrasted variations around the world in the identity of controlling shareholders. Using a sample of the 20 firms with the largest market capitalization in 27 primarily wealthy countries, they identified those firms in which a single shareholder controlled at least 20 percent of the voting rights. If what they labeled an "ultimate owner" existed, they determined whether this controlling shareholder was (a) a family, (b) the state, (c) a financial institution, (d) another widely held corporation, or (e) other. For the U.S., it was found that 80 percent of the largest firms were widely held. In contrast, all of the Mexican firms had an ultimate owner and all of these controlling shareholders were families (the highest level by far of family control in the entire sample). For these firms, the researchers also measured how often a member of the controlling family was the CEO, chairman, honorary chairman, or vice-chairman of the board of directors. In Mexi co, 95 percent of family-controlled firms had a family member serving in at least one of those positions.
When comparing the characteristics of publicly owned firms around the world, the La Porta studies clearly reinforce the traditional view of who owns and manages Mexican grupos. So we can move on to Question 2: How have Mexican families been able to finance growth while maintaining control? Reinvesting profits, issuing additional debt, and/or issuing additional equity represent the traditional range of financing options. Profit retention is an attractive choice because it does not represent a dilution of the ownership rights of existing stockholders; but this approach clearly has its limitations, and at least some debt and or equity financing is usually necessary. As mentioned, the traditional Latin American model is that the elite families own and control banks and/or insurance companies as part of their group, thereby ensuring themselves preferred access to scarce debt financing.
From the time the Mexican government re-privatized the country's financial system in the early 1990s until very recently, Mexico was a stereotypical example of this type of financial system. During most of the 1990s, the three largest Mexican banks all had clear ownership ties to either a relatively large group of major industrialists (Grupo Financiero Banamex) or to specific business groups (the branches of the Garza Sada kinship network that control Femsa and Vitro had ownership control of Grupo Financiero Bancomer and Grupo Financiero Serfin, respectively, while the largest insurance company was controlled by another Monterrey-based entrepreneur with his own group, Savia, and kinship ties to both the Garza Sada and Madero families). However, given the weakness of the Mexican banking sector, even these tied sources of debt financing have been insufficient to fund group expansion adequately.
With attractive growth opportunities, many Mexican groups have had little choice but to turn to the equity markets. Again, relying on La Porta et al., Table 2 presents comparative information on the use of the Mexican and other stock markets around the world. When compared to world averages, relatively few Mexican firms are listed on the Mexican Bolsa de Valores and initial public offerings are extremely rare. Camp (1989) directly attributes the lack of popularity of the Mexican stock market to the reluctance of controlling families (especially mid-sized firms) to give up absolute control of their firms. However, partial solutions to this equity financing problem have been developed. For example, since 1990 Mexican regulators have allowed firms to issue nonvoting shares on the Mexican exchange that have all the financial rights of a stock but none of the voting rights. Through the use of American Depositary Receipts (ADRs), another popular alternative for large Mexican groups has been to place their stock on the NYSE. Although a requirement for all ADR firms is that they follow U.S. accounting standards and comply with the rules regarding financial disclosure established by the SEC, the holders of ADRs are required to vote the same way as a firm's controlling majority. In other words, as long as the controlling family continues to hold the majority of the stock with full voting rights, a Mexican entrepreneur can raise equity capital on international markets and not risk losing control. Using dual class shares and ADRs, Babatz Torres (1997) found that 60 percent of the 121 nonfinancial Mexican firms listed on national and/or international exchanges have been able to deviate from the "one share, one vote" rule. With this structure, there can be wide differences between who actually owns a company and who has managerial control. Carlos Slim Helu, for example, can maintain full managerial control of Telmex owning only 10.2 percent of the company's total equity.
Unchallenged ownership and managerial control can be threatened by a number of actors in a publicly owned firm. For example, minority shareholders want to ensure that they receive a return on their investment and, if things go bad, that creditors may attempt to exercise legal claims over certain assets. Because maintaining control of their companies is of paramount concern to elite families--and these families are certainly influential within the Mexican political process--it should come as little surprise that Mexican law gives relatively few rights to both creditors and minority shareholders (see Table 2). As a result, MNCs and other investors that hold minority positions in Mexican firms often have little possibility of using the Mexican legal system to successfully challenge the decisions of the family owners.
Babatz Torres provides examples of the types of abuse that can result from weak minority protection. In 1996, investors of Grupo Radio Centro, a broadcasting company, were expecting a significant increase in earnings. When these earnings did not materialize, the minority shareholders demanded an explanation. The company stated that profits were below expectations because the top officers of the company (who also doubled as members of the board of directors) had been paid a substantial "management fee." In another notable case, the U.S.-based mining company Asarco acquired a 24 percent nonvoting equity stake in the Mexican mining company, Grupo Mexico, Asarco management had been promised that Grupo Mexico would adopt a dividend payout policy allowing Asarco to show a profit on its Mexican investment. Instead, Grupo Mexico management chose to reinvest all profits during the seven years in which Asarco held its minority interest. Because Mexican law requires that a shareholder must hold at least a 33 percent ow nership interest to even force an issue to be discussed at the annual stockholder meeting, Asarco could do little to change the dividend policy. It eventually sold its nonvoting shares for an amount that was roughly 25 percent less than the going rate for shares with full voting rights.
So what does all this mean? What lessons can be drawn from our discussion about partnering with Mexican grupos? These typically large, diversified firms are able to compete successfully through their ability to create such institutions as relatively efficient internal capital, labor, and product markets not available to unaffiliated firms. Family ownership and management has been and continues to be their modus operandi- Through such mechanisms as intermarriage and the contribution of startup capital for entrepreneurial ventures, the elite families that control the groups have often developed extensive kinship networks that may date back to the nineteenth century. In some cases, the needs of an entrepreneur's business are clearly secondary to those of the grandfamily. However, many elite families appear to enforce standards of conduct on their younger members that have resulted in at least capable and at times truly innovative leaders emerging to take control of the family firm. Finally, the elite families g enerally have not been willing to sacrifice control of their business groups. Ownership concentration is very high, equity offerings are unpopular, IPOs are almost unheard of, the use of dual class shares and ADRs are tolerated but only because of a critical need for capital and the fact that they do not represent a loss of control, and the protection offered to minority shareholders and creditors is dismally low when compared to world averages.
A number of obvious and not-so-obvious implications for practice emerge from these findings. First, those looking to expand into Mexico should realize that they face considerable risk if they take a minority interest in a venture with a branch of a Mexican group. To avoid this, entry mode options such as establishing a wholly owned subsidiary or creating an alliance with a majority interest may be preferred alternatives. If either a majority or a minority alliance is determined to be the best option, a firm should carefully study the characteristics of the controlling family or families of the potential alliance partner. Clearly forming a partnership with a family that tends to resemble the Monterrey rather than the Gomez model is more attractive.
Perhaps the easiest way to get a rough idea of which model the family ideology supports is to investigate the educational accomplishments of family members involved in the group's activities. If educational levels are less than ideal, a firm may want to rethink its partner choice. Moreover, investors should investigate companies that represent potential suppliers to or customers of the alliance. Given the extensive vertical and horizontal diversification common in groups as well as long-standing kinship ties between leading elite families, there exist almost infinite opportunities for transfer price manipulation and other related party transaction abuses. Although very little if any empirical research has examined this in Latin America, Chang and Hong (2000) found evidence to suggest that in Korea, cbaebols will manipulate transfer prices within the group so that profits are higher in branches where the controlling family has a greater ownership interest.
Even with these and other concerns, an examination of the success and failure of alliance activity in Mexico demonstrates that many MNCs and their local partners work well together. In fact, several of the major Mexican groups have established a clear strategy of partnering with international companies. Grupo Alfa maintains alliances with more than 20 partners both in and outside Mexico. Groups such as Alfa--and the elite families that control them--realize there is more money to be made by working with MNCs than by taking advantage of the opportunities created by weak institutional protection. If they act opportunistically, Mexican groups are likely to encounter few opportunities for future alliances, little if any access to international capital, and a descent from the ranks of the business elite. Even given the dire consequences involved with opportunistic behavior, in the current Mexican business environment there are clearly a number of elite families and the groups they control that fit this latter cat egory. In many ways, allying with a branch of a business group is analogous to marrying into a Mexican grandfamily: A wise suitor will make sure he can stand the relatives.
John Sargent is an assistant professor of international management at the University of Texas Pan American in Edinburg, Texas. He would like to thank Linda Matthews and Michael Pisani for their helpful comments.
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M. Wasserman, Persistent Oligarchs: Elites and Politics in Chihuahua, Mexico, 1910-1940 (Durham, NC: Duke University Press, 1993).
[Figure 1 omitted]
Table 1 Latin America's Largest Companies (Selected Countries) Company President Sales (*) Chile Angelini Anacleto Angelini 6,169 Luksic Andronico Luksic 2,154 Matte Eliodoro Matte 2,007 Said Jose Said 902 Ecuador Corporation Noboa Alvaro Noboa Ponton (No data) Consorcio Noboa Isabel Noboa Ponton (No data) Colombia Bavaria Andres Obregon Santo Domingo 2,322 Grupo Antioqueno Nicanor Restrepo 2,347 Grupo Aval Luis Carlos Sarmiento Angulo 1,034 Ardila Lulle Carlos Ardila Lulle 954 Mexico Cemex Lorenzo Zambrano 4,822 Carso Carlos Slim Helu 4,267 Alfa Dionisio Garza Medina 4,237 Femsa Eugenio Garza 4,057 Bimbo Roberto Servitje Sendra 3,023 Vitro Adrian Sada 2,718 Imsa Eugenio Clariond Garza 1,812 Grupo Savia Alfonso Romo Garza 2,663 Desc Fernando Senderos Mestre 2,441 Company Sector Chile Angelini Petroleum, insurance, forest products, fishing, services, electricity Luksic Aluminum, banking, beer, wine, mining, telecommunications, hotels, food Matte Paper, forest products, banking, insurance, construction, mining Said Beverages, real estate, banking Ecuador Corporation Noboa Agriculture, packaging, shipping, transportation Consorcio Noboa Food, beverages, retail, real estate, services Colombia Bavaria Beer, retailing, telecommunications, auto parts, food, media, services Grupo Antioqueno Banking, financial services, food, insurance, textiles, cement, mining, telecommunications Grupo Aval Banking, financial services, health, insurance Ardila Lulle Beer, glass, food, textiles, chemicals, media, financial services Mexico Cemex Cement Carso Telecommunications, retail, auto parts, mining, electronics, transportation, banking Alfa Petrochemicals, steel, food, auto parts, telecommunication Femsa Beer, soft drinks, glass, retail Bimbo Food (bread, snacks) Vitro Glass, bottling, appliances Imsa Steel, aluminum, construction materials, batteries Grupo Savia Food, biotechnology, insurance, packaging, education, health care Desc Chemicals, agriculture, construction, auto parts (*)Estimated 1999 sales in US$ million. Does not include information from banks or numerous group subsidiaries where no information was available. Source: Berrios & Ferro (2000) Table 2 Corporate Governance Around the World (#) Domestic IPOs/ Ownership Anti-Director Country Firms/Pop. Population Concentration Rights Argentina 4.58 0.20 0.50 4.00 Brazil 3.48 0.00 0.31 3.00 Chile 19.92 0.35 0.41 3.00 Germany 5.14 0.08 0.38 1.00 Japan 17.78 0.26 0.15 3.00 Malaysia 25.15 2.89 0.46 3.00 Mexico 2.28 0.03 0.64 0.00 Thailand 6.70 0.56 0.44 3.00 US 30.11 3.11 0.20 5.00 UK 35.68 2.01 0.17 4.00 Average 21.59 1.02 0.40 2.44 Creditor Efficiency of Rule Country Rights Judicial System of Law Argentina 1.00 6.00 5.35 Brazil 1.00 5.75 6.32 Chile 2.00 7.25 7.02 Germany 3.00 9.00 9.23 Japan 2.00 10.00 8.98 Malaysia 4.00 9.00 6.78 Mexico 0.00 6.00 5.35 Thailand 3.00 3.25 6.25 US 1.00 10.00 10.00 UK 4.00 10.00 8.57 Average 2.30 7.67 6.85 Average is for all 49 countries included in La Porta et al (1997). (#)Domestic Firms/Pop. is the ratio of of domestic firms listed in a given country to its population in 1994 IPOs/Population is the ratio of initial public offerings of equity in a given country to its population. Ownership Concentration is the average percentage of common shares owned by the three largest shareholders in the ten largest nonfinancial, privately owned domestic firms in a given country. Anti-Director Rights is an index than indicates shareholder rights and ranges from 0 to 5, with 5 representing the best protected shareholder rights. Creditor Rights in an index that ranges from 0 to 4, with 4 representing the best protected creditor rights. Efficiency of Judicial system is the assessment of the efficiency and integrity of the legal environment as it affects business, particularly foreign firms produced by Business International Corporation (scale from 0 to 10, with lower scores indicating lower efficiency levels). Rule of Law is the assessment of law and order tradition in the country produced by the risk-rating agency International Country Risk (average between 1982 and 1955, scale from 0 to 10, with lower score for less tradition of law and order). Source: La Ports, Lopez-de-Silanes, Shleifer, and Vishny (1997, 1998)
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|Title Annotation:||business alliances|
|Article Type:||Statistical Data Included|
|Date:||Nov 1, 2001|
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