Corporate governance, market competition and investment decisions in Mexican manufacturing firms

Ruiz-Porras, Antonio and Lopez-Mateo, Celina (2011): Corporate governance, market competition and investment decisions in Mexican manufacturing firms. Forthcoming in: Middle Eastern Finance and Economics

Abstract

We study how competition and corporate governance may explain investment decisions of Mexican manufacturing firms. We develop the study with indexes of market concentration and agency costs and OLS regressions. The analysis uses longitudinal census data. Our results suggest that investment is better explained by the Dominance Index, a Mexican measure of concentration, than by the Herfindahl-Hirschman one. They also suggest that agency costs (proxy for the degree of separation of ownership and control), and market competition may encourage investment decisions. Furthermore they suggest an inverse relationship between market competition and agency costs. We believe that our findings support the hypothesis that competition may be an alternative mechanism to encourage corporate practices in emerging economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate governance; competition; investment; Mexico; manufacturing, economic development
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General

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