Resumo

According to different theoretical frameworks there are factors that matter for firm capital structure. This study aims to identify the capital structure determinants of the Latin American firm as a response to relevant literature that suggests the importance of research on investment and funding in developing markets.

Previous research highlighted the relevance of studying Latin America to help understanding firm functioning economies, especially in comparison with companies of other regions. Latin America is an environment characterized by the Civil Law legal system and high ownership concentration. Firm funding in Latin American needs to be better understood given the importance of firm investment for the region economic development. The study of capital structure determinants under distinct theoretical frameworks may help identify firm attributes that improves funding capacity.

Theories on capital structure are classified in some strands: inexistence of factors that influence capital structure; taxation aspects; information asymmetry; and agency conflicts. Agency costs and informational asymmetry are particularly relevant in financing decisions of companies located in countries that present institutional fragility. Under the agency conflicts framework ownership concentration leads to powerful controlling shareholders which is expected to matter for capital structure. It is also hypothesized that Latin American firms follow a pecking order behavior.

Sample comprises 5,715 observations of 887 non-financial firms listed in the stock exchanges of Argentina, Brazil, Chile, Colombia, Mexico, and Peru, in the period 1994-2015. Econometric models having firm debt (total debt, long-term debt, and short-term debt) as the dependent variable are estimated. Models are estimated for the whole sample and also separately for each country sample so that possible country nuances can be detected. Models are estimated by the method of Generalized Least Squares for panel data.

Results show that Latin America firms follow a pecking order behavior given that profitability inhibit debt. Growth opportunities leads to more debt contracting. As expected, firm size favors access to debt possibly due to firm history and reputation. Additionally, collateral availability also favors debt, as proposed in the literature. Worth noting is the fact that agency conflicts related to ownership concentration are country specific since ownership concentration has a different effect on debt capacity depending on the country.

Political, economic, and social changes undergone in the last decades in Latin America highlights the importance of research in the region. The work presents an additional contribution to the understanding of firm investment funding and capital structure in Latin American firms by providing evidence that firms in this context tends follow a pecking order behavior to fund investment. There are specific nuances on agency relations and access to debt given the distinct effect of ownership concentration on capital structure which signals institutional differences.

Bastos, D. D., Nakamura, W. T., & Basso, L. F. C. (2009). Determinantes da estrutura de capital das companhias abertas na América Latina: um estudo empírico considerando fatores macroeconômicos e institucionais. Revista de Administração Mackenzie, 10(6), 47-77. Saona, P., & San Martín, P. (2016). Country level governance variables and ownership concentration as determinants of firm value in Latin America. International Review of Law and Economics, 47, 84-95. doi: http://dx.doi.org/10.1016/j.irle.2016.06.004