Only one way to raise capital? Colombian business groups and the dawn of internal markets

Abstract

What was the relationship between the sources of capital and the creation of internal markets in business groups in Colombia? A detailed history of the evolution of ownership schemes and capital structure of the 25 largest Colombian business groups between 1950 and 1975 answers this question. The business history and varieties of capitalism literatures have identified this organisational structure as one of the key characteristics of Latin American business and economic development. Business groups in Colombia have been key players since the second half of the twentieth century, when they adopted a new organisational structure that allowed the internalisation of capital provided by new financial legislation promoted by the World Bank. Analysis of previously unknown historical evidence explains the capital structure of the group-affiliated firms. Examples of specific groups illustrate the analysis.

Keywords:

• Business groups
• business history
• Latin America
• agglomeration
• financial development
• internal capital markets
• varieties of capitalism

Disclosure statement

No potential conflict of interest was reported by the author(s). This paper is based on Chapter 4 of the author’s doctoral thesis at the School of Business and Management at Queen Mary University of London.

Notes

1 Business groups typically consist of a set of legally independent firms, operating in multiple (often unrelated) industries, which are bound together by persistent formal (for example, equity) and informal (for example, family) ties. They are neither bound merely by short term strategic alliances nor legally consolidated into a single entity, but are owned, and often controlled, by the same owner(s) (whether individual, family, or regional entrepreneurs).

2 Superintendencia de Sociedades is the government agency responsible for inspecting and overseeing large public limited companies since 1931.

3 The number of companies refers to those registered as active in the Superintendencia de Sociedades.

4 This terminology is taken from the literature on the Enron case; it refers to limited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assets.

Additional information

Notes on contributors

Beatriz Rodriguez-Satizabal

Beatriz Rodriguez-Satizabal is a PhD candidate (2020) at the School of Business and Management from Queen Mary University of London (QMUL). She holds degrees of Economics (BSc, Universidad de los Andes) and Economic History (MSc, LSE). She specializes in business history. More specifically, her current research focuses on the evolution of the business system during the twentieth century in Latin America, with a special emphasis in Colombia. She is member of the History, Business and Entrepreneurship Research Group at School of Management of Universidad de los Andes (Colombia) and the Centre for Globalisation Research at the School of Business and Management of QMUL.