Business and Management Studies Vol. 4, No. 4; December 2018 ISSN: 2374-5916 E-ISSN: 2374-5924 Published by Redfame Publishing URL: http://bms.redfame.com 1 Ownership Concentration and Economic and Financial Performance in Latin-American Companies Tarcísio Pedro da Silva 1 , Maurício Leite 1 , Jaqueline Carla Guse 1 & Tania Cristina Chiarello 1 1 Universidade Regional de Blumenau – FURB, Blumenau, Santa Catarina, Brazil Correspondence: Maurício Leite, Rua Antônio da Veiga, 140, Sala D202 – Victor Konder, CEP: 89.031-900 – Blumenau/SC, Brazil. Received: August 19, 2018 Accepted: September 27, 2018 Online Published: October 11, 2018 doi:10.11114/bms.v4i4.3681 URL: https://doi.org/10.11114/bms.v4i4.3681 Abstract The study examined the relationship of ownership concentration in the economic and financial performance of publicly traded Latin American companies possessing American Depository Receipts (ADRs). Generally, the capital structure decisions are tied directly to the results of the organizations, thus reflecting the economic and financial performance. The correlation between the set of variables within the group of ownership structure with the group of economic and financial performance showed significant correlation with the linear combinations, when analyzed in the set of all the samples of companies and taken separately by country. However, the results did not show similar correlation to Venezuela, Colombia and Peru due to the existence of few observations. The results also portrayed a significant correlation within economic and financial performance, higher to Mexican companies, when compared with the results of other countries and among the set of the two groups of variables that highlighted the analysis by ownership structure and economic and financial performance as well. Keywords: ownership concentration, economic and financial performance, canonical correlation 1. Introduction Understanding the ownership structure is an important factor for business management, since it directly influences its efficiency by means of corporate control, a fact that contributes to the disclosure of the degree of risk diversification to shareholders (LEAL; SILVA; VALADARES, 2002). Silveira et al. (2004) argue that another factor influencing the capital structure occurs in the relationship of agency conflict within public traded companies between controlling and minority shareholders, because of the presence of ownership structure. This conflict is reinforced by the separation between both control rights and rights to the cash flow through the issuance of two classes of shares, with or without voting rights. Okimura (2003) asserts that the controlling power of the controlling shareholder enables the use of the company’s resources for its own benefit, while the other shareholders of the company partially bear the costs. This occurs since the transfer of the company’s resources by the controlling shareholder can occur through several mechanisms such as perks, excessive wages to both shareholders and relatives, underinvestment, contracts and transactions favoring interested parties, among others. The author also adds that the problem of expropriation might be more pronounced when the controlling shareholders participate in the management team of the company, especially if they have more rights control than rights on cash flow. Considering the asymmetry of information, Srour (2005) points out that the lack of transparency within the organizations and misconduct against the minority shareholders have been consistently identified as sources for poor performance in stock market, thus causing serious consequences for the efficiency of economy. Good projects cease to be funded when the firm is not committed to protecting the interests of its investors. Bastos, Nakamura and Basso (2009) insist that the determinants of capital structure are not only restricted to specific factors of the companies. They include, among others, level of tangibility, size, profitability, risk, growth opportunities, level of income tax and tax benefits. Still, the environment in which the firm operates is another factor determining the level of its indebtedness. In this regard, Terra (2007) states that country-specific factors are important determinants of capital structure in emerging markets. These specific factors include institutional infrastructure, legal and accounting practices, financial infrastructure and macroeconomic environment.