Corporate Ownership and Control Contestability in Emerging Markets: the case of Colombia

This paper studies the structure of voting control and blockholders ' contestability in Colombia based on a sample of 233 non-financial listed firms for the 1996-2004 period. Corporate control is characterized by high ownership concentration and blockholder power, which implies low separation ratios between cash flow rights and voting rights. On average the separation ratios for the largest voting block is 0.95 while for the fourth largest shareholder is 0.80. Corporate control is privately biased where there is a direct monitoring between controlling owners and firm management. Regression results show that a more equal distribution among large blockholders leads to a positive effect on both firm value and performance. This finding is reinforced when the probability of forming a winning coalition by the largest block decreases and when there is a fourth voting block able to contest a coalition of the largest top-three stake holders that are not able to get single majority of 51 percent on firm's equity