Argentina - Report on the Observance of Standards and Codes (ROSC) : corporate governance country assessment

Abstract

Argentina has a relatively well developed stock market, with impressive market value gains in the past year driven by the fast growing economy, yet in some ways a shadow of its former self before the end of the millennium financial crisis. The market is illiquid, as Argentinean companies prefer to list overseas, and few initial public offers (IPOs) occur. Bolsa de Comercio de Buenos Aires (BCBA) and Mercado de Valores de Buenos Aires (MERVAL) have been less successful in dynamising trading and foreign and domestic investor interest than their best competitors in the region, such as Brazil. Barely a few years ago the BOVESPA main tier experienced similar lack of fresh investor interest, and attained a new life via the Novo Mercado premium corporate governance listing tier, where multiple IPOs went oversubscribed year after year, luring stakeholder confidence. Argentina could be poised to attain its full potential as well, given the market fundamentals and adequate legal and market infrastructure, as there remain several key areas of policy focus which need to be addressed: good governance awareness can be aided by director training, further promotion and implementation of director independence, and strengthening of the efficacy and functioning of audit committees, while avoiding duplication costs by eliminating requirements for alternative similar corporate organs, or supplanting such organs with audit committees. A focus area of consolidating recent gains is corporate disclosure. An area which merits particular emphasis is related party transaction monitoring, including transaction within financial groups where enforcement is more challenging due to several regulators involved. Related to the issue is the need for strengthening the control over auditor quality for listed firms. Finally, ownership information at the ultimate level should be available at a minimum to regulators to aid enforcement, but also to the market.

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