GOVERNANCE OF LARGE CORPORATIONS IN MEXICO AND PRODUCTIVITY IMPLICATIONS

The main objective of this paper is to describe the essential features of large Mexican firms. The observed structure fits with the stylized facts of the business groups found in many developing countries. In particular, there is a high concentration of control rights, not only because of the fact that family members own large holdings of stock in these firms, but also because it is a common practice to use pyramids and to issue “non-voting” shares. It is argued that the lack of counterbalances and the excessive control rights in the hands of few large shareholders produce a rent extraction problem. Hence those stakeholders that potentially experience opportunistic behavior are reluctant to establish long-term relationships, with the corresponding negative consequences on the productivity of the firm.