Effects of ownership structure on the mergers and acquisitions decisions in Brazilian firms


  • Nasaré Vieira Nogueira Departamento de Engenharia de Produção, Escola de Engenharia de São Carlos, Brazil
  • Luiz Ricardo Kabbach de Castro Department of Management, Warrington College of Business, University of Florida, Gainesville, Florida, USA


Ownership structure, Mergers and acquisitions, Agency theory, Emerging economy


Purpose – The purpose of this study is to examine the effects of ownership structure on merger and acquisition (M&A) decisions of Brazilian listed companies.

Design/methodology/approach – This paper is an applied and explanatory research based on secondary data. The sample is comprises non-financial companies listed on the BM&FBovespa between 1998
and 2007. Considering that the dependent variable is binary, the authors estimate panel data logistic regression models. Considering the existence of conflicts of interest among those who have the decisionmaking
power and the supplier of capital for M&A transactions, they draw upon the Agency Theory to develop the theoretical hypotheses.

Findings – The results show that, for a sample of Brazilian non-financial companies listed on the BM&FBovespa (B3), from 1998 to 2007, Brazilian firms present, on average, a highly concentrated ownership
structure and the major controlling shareholders are families or the State. These characteristics are negatively related to the likelihood of M&A transactions, as most of these controlling shareholders are reluctant to adopt
mechanisms that reduce their control.

Research limitations/implications – With regard to the limitations, this study considered only the M&A definitions as stated by the Bureau van Dijk database. In this sense, future studies may analyze the
effects of ownership structure based on other M&A definitions and typologies. In addition, the study is limited to the period from 1998 to 2007, which is prior to the international financial crisis. Future studies may
extend the analysis period to include the post-crisis period (2008) to check if there are differences in M&A strategies before and after the crisis.

Practical implications – From a managerial perspective, the results show that minority shareholders have little or no influence over an M&Adecision, so they cannot decide on the use of resources for fast growth
and access to new markets through M&A. Thus, the investment decision must take into account the nature and the quality of the controlling shareholder.

Social implications – This study shows a significant and negative effect of ownership concentration on the likelihood of M&A transactions. In part, this result demonstrates the importance of understanding the behavior of controlling shareholders before inferring on other key aspects that the M&A literature tends to make fundamental in explaining M&A decisions in publicly traded companies, particularly, in an environment of low minority shareholder protection.

Originality/value – Previous studies have partly found that the M&A decision is motivated by individual advantages obtained from increasing the size of the firm, or from managerial hubris. The results show that
these hypotheses do not hold in the Brazilian context. Moreover, the results indicate that M&A decisions are associated with the characteristics of the controlling shareholder, their level of ownership concentration and
their typology, contributing to the agency debate on whether the incentive or the entrenchment effect prevails in the context of the agency problem between controlling and minority shareholders, particularly, in an
institutional environment of low shareholder protection.



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