Corporategovernance,marketcompetitionandinvestmentdecisionsinMexicanmanufacturingﬁrms Ruiz-Porras,AntonioandLopez-Mateo,Celina MunichPersonalRePEcArchive

(1)

Munich Personal RePEc Archive

Corporate governance, market

competition and investment decisions in Mexican manufacturing firms

Ruiz-Porras, Antonio and Lopez-Mateo, Celina

Universidad de Guadalajara, CUCEA

27 January 2011

Online at https://mpra.ub.uni-muenchen.de/28452/

MPRA Paper No. 28452, posted 28 Jan 2011 08:47 UTC

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CORPORATE GOVER A CE, MARKET COMPETITIO A D I VESTME T DECISIO S I MEXICA MA UFACTURI G FIRMS

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Abstract

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Keywords: * . - - ! ! $ 3 - ! " - .

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CORPORATE GOVER A CE, MARKET COMPETITIO A D I VESTME T DECISIO S I MEXICA MA UFACTURI G FIRMS

1. Introduction

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2. Economic development, corporate governance, market competition and investment

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3. Methodology

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(10)

L 3.1 Data sources

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(11)

@

Table 1: The census and the Mexican Economics Ministry classification for manufacturing firms

I EGI Census´

Classification of Firms in the Industry i

(t)

Employees in the Firms that Belong to Group t

Mean of Employees in the Firms that Belong

to Group t (M_jt)

Type of Firm According to the SE classification

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C < L 0! ((

< : C 0! ((

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L 444

$

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) ) )

=

∑

(12)

2 ) 2 . % % - " % Q R Q)R . Q RG ) ! "

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Q)R . Q RG % 3 Q R " % G % 3 Q)R "

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. -( % % ) -( " - 4

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444

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2 9) ( - % " ! " % Q R Q)RG )

2 . % % - " % Q R Q)R . Q R4

3.2 Variables

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(13)

- ! 4 - ( ( -( % - "( 2 ! % " ! K

4 " % % % % % - ( ( !! % ( 4

Table 2: Investment and its determinants

Variables (Indexes) Measures Indicator

Dependent variable

7 ! 9 3 % - ( 3 % ' " 3 % - ( " !

S ( " " 3 % .

! ( " " 3 %

(%

Independent Variables

887 $ 5 - - 8 " % ( 8 - !

7 $ 5 - - ! - 7 % 3

6 . 3 0 " 2 %

- (

" . 3

( (

( 0 " 2 %

- (

" ( ( (

Econometric control variables

7 ! " - ( " % - ( " 3 %

- ( -5

* "( 2 / . ? .

9 ! 9 3 % ( ( " " 3 %

The table shows the variables and indicators used in the econometric assessments. The dependent variable is investment.

The independent variables aim to capture the main features of the separation of ownership and control and of market competition. The table includes the definitions of the variables according to the Economic Census of I!EGI (Mexican Bureau of Statistics).

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- - . - ! . 3 - " 2

2 % - ( . - ( ! 4 /! - (( - (( ! %

2 . - - 3 4 8 2 2 complementary ! " . - -

% . * ( % + % ( % 0- 4 !

(14)

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% ( ! " ! 5 - - 4 7 - % % % H ! ( .

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% 3 % ' - ( @@ 5 -- " - 4 0 - ! %

$ 3 - . ( 2 % "" - " ! K ! "" - . -

- ! 5 4^:

1 (% 2 % (% 887 % 7 % 3 " - " L

% . ! " - . - 4 * . " ! " - . %

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- 5 -- " - 4 / - - - ! ! ((

" ! - ( . ! ! 5 4 1 ( ! " " ! ( .

- . " % (% - - ! - % -

- 4 2 ! ( " ; - ! " 887 % 7 4

1 . 3 - % - "" - - 4 1 (

- - " - - (( % ! . ! 4

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! % . " ! 5 - - ( ( % % . " - ! 4

: 7 % 3 % "" " ! M2 5 U % ! - % 3 % ( " ! H ( %

! " " ! 4 0 ' - ( @@ % M2 5 @ 4

(15)

:

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mks " " ! k ( % - " - sG n

! " " ! - s 887 % 3 (

∑

=

5

!5

887 :

7 ( 2 % 3 " . % % % ' - ( @@ 4 7 -

% 3 Mts " " ! . % - " . t % - "

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∑









= 

t s

ts t

s HHI

! M

DI ;

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? . 4 B 5 % 6 ! @ ( ! ( ! " ! " - .

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( % ( ! " ! 2 -( % . ! 5

( 4

:4: $ % ( . - " - % - ! - - H

1 ( . ( " - ( " ! - " - % - ( ! .

- . - ! 5 - ! % ! % - 4 0 - - " -

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∑

= 







= ⁿ 

k s

ks

s HHI

DI m

(16)

;

3 ( - ( ! * .( " - 4 0 - " - (( 2 ! . ( ! "

- % % ( % % " ! " % % ( ( 4

/- ! - (( ( . ( - " - (( 2 . - "" - !

( - " ! 2 - - % % ( % ! 4 $

( . " ! % - ( " - % - ( ! 4

! - 2 " . " - ! 4 "

-( % ! 887 ! " ! 5 - - 4 - %

! 2 74 1 2 - ! - %

( ( ( %4 / - ( -( % 2 - ! ( ! ! " . - - "

- - % - ! ( 4 / - . % " . " -

- " - " " ! ! - ! (( ! % ! % ( . 4 ! % ( - " -

ij ij ij

ij ij

ij MC OE AU IO CF S

I =α +α ( +α ( +α ( +α ( +α ( +α ( +ε

( _: _; _C _< C

2 7) ( . " ! G $*) ( . " ! 5 - - ! G 6/)

( . " . 3 G &) ( . " ( G 76)

( . " ! G *9) ( . " - "( 2 ( G 0) ( . "

" " !G % ε_ij % ! !4

1 6 % + 0H 6+0 - H % ( . ( 4

0 - (( 6+0 - H % ( % ! B+&/ %

- ! 4 0 - ! -( % + " ! G ? ! (

" ε_ijV^?

( )

^σ G : 8 ! - % - S Iε₎J=σ G ; ? - " -

! % (G % C ? " - ! ( - (( 4 8 2 % H - " 6+0

(17)

C

! % " ( 2 ( - ! ( ! - ( 4

0 - -( % H B B - . % ! K /0/ 4

4. Empirical assessment

1 . 3 ( . - ( 2 % % ( 4 * - ( 2

2 - ( ( % . " - (( 2 .

3 % ( 4 1 ( ! - ( 2 2

% ! . ! % 3 4 1 !! - ( ( ( :4

Table 3. Correlations among the independent variables Firm Size/

Correlations

Agency cost variables

Market concentration

indexes

HHI and asset utilization

ratios

HHI and operating expenses ratios

DI and asset utilization

ratios

DI and operating

expenses ratios

$ - 4 ; ;

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4 <@<

4

4 C 4@;;

4 <@

4 @

4 :CL 4<:

4 C@

4 L@

0! (( 4 LCL

4 C @

4:<@

4

4 4 L

4 ; 4 CL

4 <;L

4 :

4 <;

4 L<L

$ % ! 4 L;

4 <C

4 <<;

4 :

4 C<:

4;C<@

4 ;CC 4 C:;

4 C::

4 ; <

4 @ 4 ;L

+ . 4 LL

4 C :

4 C@L 4 <

4 < <

4; C 4

4 <LC

4 <

4 ;

4 ;@

4 C

The estimations use pairwise correlations. The agency cost variables include the asset1utilization and operating1expenses ratios. The concentration indexes include the HHI and the DI. Significance levels are given in parenthesis. One, two and three asterisks indicate significance levels of 10, 5 and 1 percent respectively.

( : - " ! - 2 . % ( - ! - ( 4

( 2 ! " . - - - ! ( ! % "

! 5 - - 4 . " - - ( 2 . -

- 3 2 - (( % % % - -( % %

(18)

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.( . 4 8 2 - " - - ! 4 " % .

" ! ( - (( ) " - % % . " 887 %

7 ( 4 9 ! ( 2 . " - - ( 2 .

3 % - - ! 4 " % . .. 3 - "

( 2 ! 5 - ! % . - - 4

( ; % C 2 ! ! - ! " 2 " . % " %

! % ( 4 * - ( ( ; - ! " . 887

! 5 - - ( % ! " ! % - 4 ( C

- ! " . 7 - - ( 4 9 ! (

( ! - ( ! % H - " .

- ! - ( 4 ! H B % B - .

- ( ! ( % ! - % - " % ( 4

(19)

Table 4. Market concentration measures, agency cost proxies and investment decisions in Mexican manufacturing firms

(OLS regressions that include the Herfindal<Hirshmann Index)

Firm size Micro Small Medium Large

Regression indicators

8 " % ( 8 - ! 7 % 3 887 4

4

4:

4 :

4 @ 4<L

4 ; 4<

6 . 3 4;L

4;;

4<

4;L

4@@

4C:

4L:

4;C

( 4

4

4 4 <

4 4 ;

* "( 2 4 @

4 <

4<

4::

:4@

4 L :4 ;

0 4L

<4 <

4

@4

4<:

C4CC

4 4 :

7 ! 4 L

4

4;@

4<

4 4;C

4<<

:4 L

* L4;

L4 C

@4:@

;4;

C4;:

:4C;

C4 :4@:

6 L L

9 <4C C4C< ;:4 C 4;:

W 9 4 4 4 4

4L 4L 4< 4L

H B 4 4 ; ;4L; ;4

Wχ 4 C 4 4 4

B - . <4 < C4C ;4 4

Wχ 4 : 4 @ 4 : 4:

The dependent variable is investment. The t1statistics are given in parenthesis. One, two and three asterisks indicate significance levels of 10, 5 and 1 percent respectively.

( ; - ! " " " . 4 7 (( .

- "" - - % . 3 % ! ( . " - 4

9 ! 887 - "" - . " ! % ! % ( . " ! 4 7 % % " ! % !

" ! - "" - ( . " - 4 7 ! - - "" - - % ((

- ( ( % . " - 4 ( -( !

- " 2 % - ( % . " ! 5 - !

! - . ! % - 4

(20)

L

0 - (( . % " " ! % - ! ( !

" ( 4 7 (( - ! ( ( . % )

. " - - .. (( 3 ( ( - 4 9 !

H B % ) - (( " ! ( % B - .

% ) - (( " ! - % - 4 . ! % ( !

3 ( ( ! . - . - ! 5 - ! % !

% - $ 3 - ! " - . " ! 4

( C - ! " - % " . 4 + 5

( (( . - "" - - % . 3

% ! ( . " - 4 7 .( 7 - - - "" - . %

. " - " ! % !and ( . " ! 4 7 % % ! " 7 ( !

. " - 887 4 " ! - ( " 2 % - ..

7 ( ! % ! 887 4 ( % "" -

" ! K ! 4 ( - " ! % - ! ( ! . % . "" - "

- . - % ! 5 - ! ! 4

! " . % " " ! % - ! ( ! ( - " !

" % . 4 . ! ( ( . % ) . " - -

.. (( 3 ( ( - 4 9 ! H B

- " ! ! ( % B - . -- % ( ! - % -4

( . 2 - "" - - % - ( (

% . " - ! " - 4 $ - " ! (

. " - % ! " ! % - 4

(21)

@

Table 5. Market concentration measures, agency cost proxies and investment decisions in Mexican manufacturing firms

(OLS regressions that include the Dominance Index)

Regression indicators

! - 7 % 3 7 4

4 :

4:

4

4<<

4@L

4 C 4C@

6 . 3 4;@

4C

4CL 4:C

4 : 4<@

4L 4;

( 4

4

4 4:C

4 4:;

4 4

* "( 2 4

4L

4 C 4C

4:C

;4 ;

4 :4:

0 4L

<4L

4

@4

4<:

C4<@

4 C 4C:

7 ! 4 L

4 <

4;@

4<<

4 <

4 C

4 : :4C<

* L4

4@;

@4@;

C4@;

<4C

;4 @

<4;;

;4@;

6 L L

9 4<< C4L ;C4<C 4C

W 9 4 4 4 4

4L 4L 4< 4L

H B 4@ 4 < ;4; ;4L<

Wχ 4 L 4 4 4

B - . <4:C C4 @4< 4

Wχ 4 4 4 4<

The dependent variable is investment. The t1statistics are given in parenthesis. One, two and three asterisks indicate significance levels of 10, 5 and 1 percent respectively.

6 " ! ! " -( - ( ( . ! % ( ! % (

- - ( - " %4 8 2 ! " . 2 ! K

/0/ 4 0 - % % - ! % ( %X - - " - (

" ! 4 8 2 2 " - 4 " % ( /0/

2 " ! % % % ( . 4 - % 2 "

80 ( 4 (( " ! % (

% H ( - " % ( < 4

(22)

! K /0/ 2 . % % ! "

! ! % ! % ( . " ! % - " - 4 8 2 -

" % . % (% " ! - % ! (( " ! 4 0 - ! -- %

! " ! ( ( ! - ( % 2 -

. - % ! 5 - ! 4 1 ( - ( 2 5

% 3 - " ! ! " % ! 4

" % . ! % ) " - % ( H ( % % %

- % - ! - % ! (( " ! 4

Table 6. Specification tests for the regression models

Models with Herfindhal<Hirschman Index (HHI) /0/

8 ! % ( ! % (

4L L4 4<: 4

W 9 4 4 4C@ ; 4:@:@

80 !

8 ! % ( ! % (

4L 4 : 4;; 4

W 9 4 : 4 @ 4 4 < ;

Models with Dominance Index (DI) /0/

8 ! % ( ! % (

4< L4 4:C 4

W 9 4 4 4 < ; 4 <<<

80 !

8 ! % ( ! % (

:4C 4 ; 4L@ 4 C

W 9 4 4 4C@ @ 4: L

The table shows the results of the Ramseys´ tests for the two sets of investment1determinant regressions. We show shows two versions of such test. The first one, the traditional RESET test, uses powers of the estimated independent variable as regressors. The second one uses powers of the RHS variables. One, two and three asterisks indicate significance levels of 10, 5 and 1 percent respectively.

1 !! " % . % - . % - .. "

2 % - ( % ! 5 - ! ! - . ! % - 4 6

" % . 2 - . - - % - ! 5 - - !

- ! ! " - . - 4 7 % % % - .. 7

(23)

( ! % ! 887 4 9 ! !

- -( % " !K ! % - "( 2 3 (

( 4 "" - " - ( ( ! ! ( . " - %

4

5. Conclusion and discussion

1 % % 2 - . - % ! 5 - ! % ! !

3 ( ! % - " $ 3 - ! " - . " ! 4 1 % % ! 2

- % " L ! " - . % 6+0 . % - ( 4

! - ( % ( % ! " 2 " . -( % . -

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3 % ( ! " % . " 2

2 % - (4 ! 5 - - ! -( % 887 % 7 % 3 4

% - .. " 2 % - ( % ! 5 - !

! - . ! % - ! . ! " - . " ! 4 7 - . -

- % - ! 5 - - ! - ! 4 $ % -

.. 7 ! % ! 887 4 ! ( 2

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% 4 9 ! - ( .. . ! % ( 3 (

% H ( ! % - ! ( " ! % ! % ( . " ! 4

8 2 2 (% " % . % ( ! ! ( % !

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(24)

7 ! % ! 8874 " % . ! ( % .

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% - ( .. ( % ! " !

% - 4 9 ! .. ! % ( . - % " ( ! ( "

! % ! % ( . " ! 4

1 ( " % . ! . % . - . - %

! 5 - ! 4 * - ( % . "

2 2 % - ( 3 ( ! % - I' 2 5 %

$ (( @ J4 7 % % % - - " ! 3 - " (

2 - "( 2 % ! " " ! 3 - . - ( ! 4 9 !

" % . ! 5 - ! ! ( ! - !

- . - - - ! . . - ! I (( C J4 1 (% - ((

" % . .. ( 2 - ! % . - - 4

1 ( ( % ( " - . - % ! 5

- ! ! - . - ! - . 2 ! . . - ! 4 8 2 2 !

- . " - ( 2 - " - % (

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/ % (( C % ( % % - ( " !

% "" - 4 - ( ( " % . .. " %

% ! " ! % - % - ! - - 3 " ! -

% ! (( " ! 4 ( " ( ! " " ( " "

- 4

(25)

:

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(27)

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