Journals Proceedings

Abstract

In the literature, it is possible to discern two types of information asymmetry in the capital market: a horizontal type – between controlling and minority shareholders – and a vertical type– between the company and investors. Studying them is very useful because information transparency improves the parity conditions of investors, mitigates conflicts of interest, diminishes the risks of privileged information, and reduces capital costs. In this investigation, the different types of minority shareholders are studied and horizontal asymmetry is further investigated to characterize these investors and to identify the causal relations between these characteristics and the asymmetry evaluated through the spread (bid-ask). In Chile, the characterization of minority shareholders is interesting due to the property concentration, the legal framework that protects minority investors, and the accounting rules applied to companies that issue public securities. Thus, this study is descriptive and explanatory in nature and combines primary and secondary information sources. It starts with the characterization of minority shareholders for the 2013 and 2015 terms. Then, a model is proposed to enable the existing relations between the characteristics of such investors and the level of information asymmetry, as measured by the Santiago Stock Exchange (Bolsa de Comercio de Santiago) shares spread with intraday data for the 2013 term, to be studied. The results provide evidence of an existing inverse relationship between the number of minority shareholders in the year 2013 and the information asymmetry for the same term. Nevertheless, there is no significant relationship between the number of minority shareholders who are legal persons and information asymmetry.