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The main objective of the paper is to analyze the history of modern Brazilian companies through the ownership and capital structure dimensions, with the goal of justifying the relatively quick process of many Brazilian companies towards a dispersed ownership structure since the 1990s. The development of corporate governance—the mechanisms that regulate the relationship between executives and shareholders (Zahra, 1996)—is recent enough that a historical perspective may be premature. However, the advances brought forward by the literature on corporate governance may be utilized to allow another look at the industrialization process and the formation of modern capitalism in developing countries.
A central question surrounding the industrialization process is the financial requirements necessary for it to blossom. The financial link to capital accumulation is heavily analyzed by authors such as Gerschenkron (1962), Zysman (1983), and Minsky (1986), but one aspect that has been mostly overlooked is firm-level analysis. Authors like Chandler (1962) have developed a history of the modern Anglo-Saxon firm, but there is really nothing similar to many other countries. In Chandler (1962), for instance, one can find an interesting account of the emergence of the modern capitalism firm, with economies of scale and transaction costs as the driving forces for the rise of the modern firm. Corporate governance would derive from the professionalization of this kind of modern corporation, with separation between ownership and control generating the issues dealt with in this strain of literature. Using corporate governance to analyze the development of the modern firm in developing countries implies, then, that one would have to look for the development of the capital structure of firms in developing countries. Most firms would begin, necessarily, as family-owned business. How these firms develop is then the central question in this paper. Moreover, with state financing, either directly or indirectly, being so relevant to the industrialization process, questions regarding separation between private and public capital are relevant to understand the dynamics of the capital accumulation process from the point of view of firms in a developing country.
The paper is structured as follows: it presents a primer of corporate governance with a focus on the issues relevant to later analysis. Then, it traces the development of the modern firm in Brazil, beginning after the Second World War and finishing in contemporary times, after all the reforms in the Brazilian capital markets. The paper specifically chooses Brazil because this country is a good representative of the industrialization processes in Latin America. A typical process in Latin America is divided into two major phases: one in which the government delves into industrialization with unrivaled gusto, and another in which the major focus shifts from industrialization to market reforms, which results in a similar structure as the Anglo-Saxon model. Subsequently, it arrives at the proposed analysis of the development of the modern firm in Brazil through the lens of corporate governance, and finally, offers a few final comments.
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