The influence of institutional investors on the transparency of the Chilean capital market

Abstract

"This paper will analyze the effect of a combination of variables such as sources of financing, concentration of ownership, type of members of the board and the size of the company, in the transparency index which measures the degree of disclosure of the information published by companies, and was adapted from Haat, Mahenthiran, Rahman & Hamid, 2006. In this paper the transparency index is considered a proxy for the goodness or badness of corporate governance practices. Theoretically it is reasonable to expect that the participation of a new type of investor in the Chilean capital market, namely the Pension Fund Administrators (AFPs), would force businesses to disclose more information and as such it would positively affect the transparency of capital markets. However, the results suggest a different behavior. We analyzed a sample that corresponded to the companies listed on the Santiago Stock Exchange of Chile, with financial and non financial information available for the period 1996-2005, which was a set of 700 companies data-year. The analysis demonstrated that Chilean companies´ average score is 0.52, for an index of transparency with maximum value of 1. The presence of institutional investors such the Pension Fund Administrators (AFPs) has not affected nor forced the listed companies to make greater transparency of information. The AFPs have joined the majority shareholders and it can be concluded that they obtain from them the information needed to manage their portfolios."

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