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2022 | Buch

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Private Equity and Financial Development in Latin America

verfasst von: Ignacio Puente

Verlag: Springer International Publishing

Buchreihe : Latin American Political Economy

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft" , Springer Professional "Technik"

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Shallow capital markets are a key bottleneck for private sector development in Latin America. Still, there is not a large literature on capital markets and corporate governance, or on the politics of regulatory reform and business associations, focused on this region. To help address this gap, this new book introduces private equity into the financial development debate through a Latin American lens. The author looks at the cases of Brazil, Mexico, Chile, Colombia, and Argentina. And proposes a shift in the financial development discussion from institutional explanations focused only on rules to an actor-based argument centered on the role of institutional investors, in particular pension funds .

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract

This book is motivated by two observations. The first one is that three decades after democratization and liberalization reforms, Latin American capital markets remain underdeveloped. The second one is the considerable amount of government-related funding behind private equity investors. Putting together these two observations and studying the emergence of private capital markets in Latin America, this book emphasizes the role of institutional investors, in particular development banks and pension funds, as an alternative to just focusing on the institutional determinants of investment. Chapter 1 lays out the book’s main arguments and key contributions. Then, it introduces private equity: it describes the investment model, discusses evidence about its performance, and contrasts it with other corporate governance arrangements prevalent in a developing context. It makes the case for why Latin America is an interesting, though unexpected, region to study this topic. It discusses data sources and presents the book’s methodological approach. And finally, it gives an overview of the rest of the book.

Ignacio Puente

Chapter 2. Private Equity, Financial Development, and Corporate Governance Reform

Abstract

This chapter presents the book’s main theoretical contributions. First, it frames the question about the origins of private equity markets within the broader literatures on financial development and corporate governance reform. Private equity provides firms with a distinctive source of financing that is otherwise elusive in the developing world. It combines three characteristics: it is risky, institutional, and—at least relative to other financial investors—patient. Second, it contrasts rules-based arguments about capital market development centered on investor protections with the book’s more direct focus on institutional investors. Third, it discusses different hypotheses regarding the sources of corporate governance reform and presents a “quiet politics” approach centered on the role of industry associations. And fourth, it updates the literature on the role of the state in finance and characterizes a novel model for financial productive policymaking.

Ignacio Puente

Chapter 3. Private Equity and Latin America

Abstract

This chapter presents firm-level evidence to support the relationship between private equity, financial development, and corporate governance modernization. It leverages an untapped dataset of all companies that listed their shares in Latin American stock exchanges between 2002 and 2017. It provides evidence that PE is an important driver of stock market listings. And shows PE-backed companies have more dispersed ownership structures and exhibit fewer kinship ties among their leadership, in contrast to family-based firms otherwise prevalent in the region. Moreover, this chapter analyzes the penetration of private equity across Latin American countries by triangulating multiple data sources and shows the results are not fully consistent with what would be expected based on the main hypotheses from the literature.

Ignacio Puente

Chapter 4. Institutions: Rules and Investors

Abstract

This chapter provides evidence that government-related investors play a relevant role during the emergence of domestic private capital markets. In particular, it shows different models through which development financial institutions provide funding to the PE industry. It highlights the role of multilateral development banks. And then it analyzes the main initiatives in each of the five country case studies and discusses their governance challenges. For example, it inquires on the role of BNDESPAR in Brazil, Fondo de Fondos in Mexico, and CORFO in Chile. The case studies also explore the engagement of pension funds and suggest their participation is as a key step for the growth of private equity.

Ignacio Puente

Chapter 5. Industry Associations and the Politics of Regulatory Reform

Abstract

This chapter explores the politics behind the key regulations that helped institutionalize the emerging private capital industry in the five country case studies. It emphasizes the public–private collaboration behind PE industry associations, and shows how multilateral and domestic public agencies promoted the collective action of fund managers by sponsoring their associations. In turn, it describes how these industry associations helped co-create the industry’s regulatory framework: for example, they lobbied to access pension fund resources and helped create tax-efficient investment vehicles. Notably, these PE associations tried to keep their policy arena “quiet,” outside congress and large partisan politics.

Ignacio Puente

Chapter 6. Beyond Latin America

Abstract

This chapter extends the arguments beyond Latin America. It finds evidence that governments also acted as early investors in the US, Europe and Asia, playing an important role in the emergence of private equity markets in those regions. This provides external validity to the findings from the Latin American cases, and shows the pervasive role of government-related financial institutions during the early stages of market development, even in more developed capital markets. Outside of Latin America, public agencies also helped organize PE fund managers into industry associations. And in turn, these associations played an important role co-creating the industry’s regulatory environment through a set of reforms that in most cases also appeared to follow a “quiet politics” logic.

Ignacio Puente

Chapter 7. Conclusions

Abstract

To wrap up, the conclusion discusses the book’s main contributions, explores its implications, and acknowledges some of its limitations. Regarding contributions, the book (1) introduces private equity to the development debate; (2) prompts a shift in the discussion on financial development from institutional explanations focused only on rules—democracy and investor protections—to an actor-based argument centered on institutional investors; and (3) characterizes a novel model of financial productive policymaking. It also proposes a research agenda on the political economy of finance and corporate governance reform based on the role of pension funds.

Ignacio Puente

Backmatter

Titel: Private Equity and Financial Development in Latin America
verfasst von: Ignacio Puente
Verlag: Springer International Publishing
Electronic ISBN: 978-3-030-88983-8
Print ISBN: 978-3-030-88982-1
DOI: https://doi.org/10.1007/978-3-030-88983-8

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Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Chapter 2. Private Equity, Financial Development, and Corporate Governance Reform

Chapter 3. Private Equity and Latin America

Chapter 4. Institutions: Rules and Investors

Chapter 5. Industry Associations and the Politics of Regulatory Reform

Chapter 6. Beyond Latin America

Chapter 7. Conclusions

Backmatter

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