Governance In Argentina

CORPORATE GOVERNANCE

Corporate Governance in Argentina: the outcome of economic freedom (1991 ± 2000)
Rodolfo Apreda*
This paper develops and provides evidence for two statements: a) In Argentina, there has been a marked shift in ownership and control from big family-owned domestic companies towards foreign groups and investment funds, and b) While coping with governance issues, Argentinahas been following the common law countries tradition, fostering a capitalmarket-based financial system and swapping its corporate governance practices outright. To ground these statements on facts, I survey corporate governance issues in this country before 1991, the underlying legal framework, the new rules of the game in capital structure and ownership as from 1991, largely due to a wave ofprivatisations, restructuring, mergers and acquisitions that took place through the last decade. Keywords: Corporate governance, common law countries, privatisations and deregulation

Introduction
orporate Governance'' seems to be a growing concern among academics, practitioners, law-makers, regulators and company's stakeholders. This is not surprising because corporate governance has to do withownership, accountability and control; incomplete contracts and agency problems; incentives and performance design; transaction costs, bounded rationality and opportunistic behaviour. Since Berle and Means' (1932) well-known book, the concept took a long step further from the study of the separation of ownership and control, which had led to the first widely accepted meaning of corporate governance.It was after distinctive research carried out by Jensen, Fama, Williamson and Hart, among others, that the subject established itself as a complex and single field. A comprehensive survey of these efforts and essential sources can be found in Shleifer and Vishny (1986), while a truly encompassing work in comparative analysis of governance structures in advanced economies is provided by Demirag(1998).

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* Address for correspondence: Universidad del Cema, Room 680, Avda. Cordoba 374, Buenos Aires, Zip Code 1054, Argentina. Tel: (5411) 4 314 2269; E-mail: ra@cema.edu.ar

At present, there is a widespread consensus about the need for framing corporate governance issues into the context of corporate law, as was done in earlier work of Easterbrook and Fischel (1991). Althoughglobalisation is in progress, impressive changes have already been coming about in most countries around the world. Therefore, a distinctive interest in addressing corporate governance problems has arisen, either in emergent economies of Latin America and Asian countries, or in the transitional economies that spread over eastern Europe. It is from this viewpoint that Argentina seems a worthy case-study.From being a rather closed economy, with a large roster of state-owned companies, distressing regulatory surroundings and inefficient industries, the country became an open and almost liberal economy in the span of only a decade. It curbed inflation, set up a Currency Board, dismantled most of the state ownership of industries and services, fostered the capital market and privatised the pensionfunds. Furthermore, it recast the structure of ownership in almost all the private companies, and

Volume 9

Number 4

October 2001

# Blackwell Publishers Ltd 2001. 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA.

EMPIRICAL RESEARCH-BASED and THEORY-BUILDING PAPERS

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swapped old corporate governance practices with the current ones we find in thecommon law countries. Although the whole process is still under way, it seems a good subject to research, on which the first attempt was recently done by Apreda (1999a). What we want to carry out in this paper can be broken down into the following stages: a) Firstly, we will review how corporate governance evolved in Argentina before 1991, because that year signalled the starting point of a...