Laws Versus Contracts: Shareholder Protections and Ownership Concentration in Brazil, 1890-1950

Posted: 24 Nov 2008

See all articles by Aldo Musacchio

Aldo Musacchio

Brandeis University- International Business School; National Bureau of Economic Research

Date Written: Septmeber 23, 2008

Abstract

This article examines some of the institutional conditions that facilitated the development of equity markets in Brazil. A critical factor was the addition of protections for investors to corporate bylaws, which enabled relatively large corporations in Brazil to attract investors in large numbers. By availing themselves of this strategy, the firms generated a relatively low concentration of ownership before 1910. Archival evidence, such as company statutes and shareholder lists, reveals that the addition of voting rights to their bylaws, particularly maximum-vote provisions and graduated voting scales (which stipulated that less-than-proportional votes increase in parallel with shareholdings), allowed many Brazilian corporations to balance the relative voting power of their small and large investors. In companies that made such arrangements, the concentration of ownership and control was sharply lower than in the average company. Judging by the Brazilian companies examined for this article, it also appears that the concentration of control was significantly lower before 1910 than it is today.

Keywords: brazil, corporate law, investor protections, shareholder protection

JEL Classification: F23, G38, K22, L14, N26, N86

Suggested Citation

Musacchio, Aldo, Laws Versus Contracts: Shareholder Protections and Ownership Concentration in Brazil, 1890-1950 (Septmeber 23, 2008). Business History Review, Vol. 82, No. 3, Available at SSRN: https://ssrn.com/abstract=1305963

Aldo Musacchio (Contact Author)

Brandeis University- International Business School ( email )

415 South Street MC 32
Waltham, MA 02454-9110
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/aldo_musacchio

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