President interlocking, family firms and performance during turbulent timesEvidence from Latin America

Resumen

In Latin America, company ownership is typically concentrated in the hands of controlling families, who build powerful business groups which facilitate interlocking practices. The purpose of this study is to examine how President interlocking relates with financial performance in Latin American firms, under uncertainty circumstances. Using regression analysis (panel least squares), the association between return on assets and President interlocking during turbulent times is analyzed. For the latter, annual data (2009–2010) from non-financial publicly traded companies in Chile (243 firms) and Mexico (89 firms) is employed. It is documented that President interlocking in Latin American firms is positively associated with financial performance. However, this effect is higher in Chile than in Mexico, where minority shareholders and other stakeholders are better protected against expropriation. This study increases the understanding of the strengths of President interlocks in stormy times, by introducing the Latin American context.