Some are More Equal than Others: the Relation Between Ownership Concentration and Shareholders' Agreements

Among the mechanisms used by firms to minimize agency problems arising from disparate interests are ownership structure and shareholders' agreements. The objective of this study is to examine the degree of concentration of ownership structure and its relationship with the presence of a shareholders' agreement. This relationship was tested with a sample of 551 Brazilian companies listed on BMF&Bovespa during the period from 1999 to 2013. Initially cluster analysis was used to establish different categories with respect to the degree of concentration of ownership. Subsequently, variance analysis (ANOVA) was used to identify differences between means and, finally, logistic regression was used to measure the influence of ownership concentration on the probability of the presence of a shareholders' agreement. The results show that companies with more concentrated ownership tend not to have shareholder agreements, which can explained by the fact that owners already have sufficient voting power to ensure their interests. However, ownership concentrated in the three largest partners positively influences the presence of an agreement, since the objective is to guarantee their interests by means of the clauses in the agreements whether by ensuring the eligibility of members on the board or by establishing the conditions for transfer of shares. This research contributes to understanding the relationship between ownership structure and the use of shareholders' agreements.