The Effect of Corporate Governance Practices on Company Market Valuation and Payout Policy in Chile

In this paper we ask whether corporate governance practices at the firm level within a single country affect these firms` market valuation. This question is crucial in assessing the potential benefits for firms of changing their own practices, even though they cannot affect their country`s rules. In particular, the Chilean case presents at least three interesting features that make its study especially relevant for other emerging economies. First, the Chilean corporate structure presents highly concentrated ownership, widespread use of pyramid structures to separate cash from control rights and opaque ultimate ownership identification. Second, an amendment to the Securities Market Law and the Corporations Law was recently passed with the intention of improving improve corporate governance in Chile. Finally, the Chilean capital market is relatively developed, with more than two decades of substantial participation by institutional investors