Journal
JOURNAL OF FINANCIAL ECONOMICS
Volume 92, Issue 2, Pages 182-204Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jfineco.2008.03.005
Keywords
Information and market efficiency; International financial markets; Latin America
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Stock price synchronicity has been attributed to poor corporate governance and a lack of firm-level transparency. This paper investigates the association between different kinds of firm interlocks, control groups, and synchronicity in Chile. A unique data set containing equity cross-holdings, common individual owners, and director interlocks is used to map out firm ties and control groups. While there is a correlation between synchronicity and share ownership and equity ties, synchronicity is more strongly correlated with interlocking directorates. The presence of share directors is associated with either reduced firm-level transparency or increased correlation in firm fundamentals-due, for example, to joint resource allocation across the firms. (C) 2008 Elsevier B.V. All rights reserved.Stock price synchronicity has been attributed to poor corporate governance and a lack of firm-level transparency. This paper investigates the association between different kinds of firm interlocks, control groups, and synchronicity in Chile. A unique data set containing equity cross-holdings, common individual owners, and director interlocks is used to map out firm ties and control groups. While there is a correlation between synchronicity and share ownership and equity ties, synchronicity is more strongly correlated with interlocking directorates. The presence of share directors is associated with either reduced firm-level transparency or increased correlation in firm fundamentals-due, for example, to joint resource allocation across the firms. (C) 2008 Elsevier B.V. All rights reserved.
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