2.1. Company Size

The size of a company is a significant variable influencing its capital structure. Some authors have argued that larger companies have fewer restrictions on access to financing (^{Titman and Wessels, 1988}; ^{Rajan and Zingales, 1995}; ^{Schiffer and Weder, 2001}; ^{Rao et al., 2018}). Several empirical studies have shown a positive relationship between company size and external financing (Rajan and Zingales, 1995; ^{Psillaki and Daskalakis, 2009}; ^{Forte et al., 2013}; ^{Rao et al., 2018}).

^{Rajan and Zingales (1995)} noted that large companies can raise more social capital to finance their operations due to a lower information asymmetry problem, so they acquire less debt. This means that company size is negatively related to the level of indebtedness (^{Schiffer and Weder, 2001}). Nevertheless, companies with higher growth opportunities are more likely to exhaust their internal resources and need additional financing; thus, company growth is expected to have a positive relationship with indebtedness (^{Rao et al., 2018}). In the same vein, ^{Forte et al. (2013)} found evidence that size is positively related to the level of indebtedness. ^{Michaelas et al. (1999)} noted that small companies avoid external financing and rely more on retained earnings and bank financing because issuing shares could lead to losing control of the founding owners.

2.2. Age of the Company

^{Yazdanfar and Öhman (2016)} indicated that the results concerning the relationship between the age of the company and indebtedness are ambiguous. On the one hand, information asymmetry particularly affects younger companies because they have limited or no credit history. On the other hand, they reported a negative relationship between the company’s age and indebtedness. This is because older companies are more likely to use internal financing sources than younger companies. Similarly, ^{Hall et al. (2004)} indicated that age is negatively related to external financing because the older a company is, the more profits it can accumulate; thus, an older firm will require less financing than a younger company. Similarly, ^{La Rocca et al. (2011)} reported that small companies have higher levels of indebtedness in their initial years; however, this proportion of debt is reduced in the later stages of their life cycle as companies accumulate profits that they use as a source of financing. In contrast, ^{Rao et al. (2018)} showed that it is easier for older companies to obtain funding because they have better creditworthiness and higher credibility in the loan market.

2.3. Company Size and Age

^{Winker (1996)} demonstrated the impact of company size and age on the probability of being rationed in the loan sector. ^{Petersen and Rajan (1994)} indicated that the availability of financing from institutions increases with the length of time that the relationship between the company and the financial institution has been in place. However, indebtedness decreases with age but increases with size because young companies tend to receive external financing. ^{Kumar and Rao (2016)} contradicted this finding by stating that debt decreases as company size increases and, on the other hand, rises as companies age. According to ^{Michaelas et al. (1999)}, the positive relationship between size and total debt level indicates that the larger a company is, the greater its indebtedness. Similarly, ^{Guercio et al. (2020)} identified a significant positive relationship between company size and diversification of financing sources. Furthermore, according to ^{Briozzo and Vigier (2014)}, the financial life cycle theory indicates that the size and age of a company influence its likelihood of diversifying its equity structure.

2.4. Economic Sector

^{Michaelas et al. (1999)} noted that the economic sector has a greater effect on the level of indebtedness and debt maturity in smaller companies. Similarly, ^{Mac An Bhaird and Lucey (2014)} reported that a company’s financing decisions are influenced by the economic sector. ^{Guercio et al. (2017)} noted that service sector companies present greater restrictions on accessing external financing. Conversely, ^{Andrieu et al. (2018)} highlighted that manufacturing companies are better positioned to access funds than those operating in the service and commerce sectors. ^{Briozzo and Vigier (2014)} observed that the above is because companies in the manufacturing sector have more assets that can serve as loan collateral. In this respect, ^{Cressy and Olofsson (1997)} indicated that it is more difficult for the intangible assets of service sector companies to be evaluated by lenders than the tangible assets of manufacturing companies. In contrast, ^{Beck et al. (2005)} noted that manufacturing companies face more obstacles in accessing external financing. In contrast, ^{Nizaeva and Coskun (2019)} showed that companies in the trade sector are less financially constrained than those in the service and manufacturing sectors.

2.5. Empirical Studies Linked to the Research Hypotheses

In their research, ^{Watkins and Flores (2016)} considered a sample of 89 nonfinancial companies that were listed on the Mexican Stock Exchange from 2001 to 2012. They found that nonfinancial companies have a high concentration of ownership in a small group (50% on average). This result did not change significantly when comparing one year’s ownership percentage against the next. An exception was found during the financial crisis of 2008, when the concentration of ownership was greater than that in previous years. They concluded that the ownership concentration variable was somewhat stable during the period analyzed; hence, it can be inferred that most shareholders were reluctant to lose control of their companies. On the other hand, they concluded that the concentration of ownership in companies has a positive relationship with business performance and a negative relationship with the percentage of independent members on the board of directors, the size of the company, and the debt level.

Using a sample of 4,000 companies from Germany, France, Italy, and the United Kingdom, ^{Franks et al. (2012)} reported that in countries with strong investor protection and developed financial markets, family businesses increase their number of major shareholders as they age. Furthermore, family control is more concentrated in industries where low investment opportunities, low merger and acquisition activity, and new stock issuances are major challenges to avoid dilution of family ownership. In contrast, family control is very stable over time in countries with weak investor protection and underdeveloped financial markets. Additionally, family control in an industry is not related to investment opportunities, mergers, or acquisitions. Furthermore, company age is positively related with the concentration of ownership because the older the company is, the more difficult it is for the founding partners to reduce their participation in the company. Founding partners believe that a high concentration of ownership allows for the establishment of lasting relationships and is part of the identity and life of the majority shareholders.

^{Rogers et al. (2008)} studied a sample of 176 nonfinancial companies that were listed on the São Paulo Stock Exchange in Brazil and reported that the determining factors of the ownership structure are company size, market instability, and market regulation, with the last factor being the most significant. They inferred that the larger the company is, the more the concentration of ownership tends to decrease. This is because as a company grows, greater investment is needed, which leads to the inclusion of new partners.

^{Donelli et al. (2013)} conducted a study on the determinants of the ownership structure of Chilean nonfinancial companies over 20 years. Among the empirical findings, they discovered that large shareholders control most companies. They also found that blocks of shares held by controlling shareholders are high and constant over time since share issuance is conducted through block operations. Thus, in a year, the block holdings of the controlling shareholders decrease or increase by 6%, or approximately 7%.

In a similar study, ^{Lazarides et al. (2009)} analyzed the ownership structure of companies in Greece. They concluded that older companies show lower levels of ownership concentration because, as time passes, companies need to grow and require more investment; thus, companies tend to issue shares, thereby reducing their internal ownership level.

3.1. Sample

The sample consisted of 145 companies registered on the Mexican Stock Exchange (MSE) that had current and available information from 2012 to 2022. A total of 70.34% of the companies had information for all eleven years, and 20.69% had information for more than half of the period because they entered the stock exchange after 2012, exited the stock exchange before 2022, or had several years of suspension. Finally, 4.14% had no information. The number of listed companies at the end of this study was 118.

3.2. Data Collection Technique and Instrument

The data collection was performed via an EXCEL template, integrating a database with information from the annual audited financial reports for the period of 2012-2022 obtained from the MSE website and some companies’ websites. This includes information related to the term of listing on the MSE, the amount and number of times shares were issued, and the purpose of each issue. The manually obtained data included 1938 qualitative and quantitative observations. There was no public database with access to this type of information, which was one of this study’s first contributions.

3.3. Conceptual and Operational Definitions of the Variables

Table 1 details the conceptual and operational definitions of the variables used in this study.

3.4. Procedure and Data Analysis

Data analysis was performed via the Statistical Package for Social Science (SPSS), GRETL, and EXCEL. Figure 1 shows the analysis procedure followed in this study. First, the population of Mexican public companies (MPCs) and their share issuance were analyzed descriptively through segregation by sector, purpose of issuance, and percentage issued. The aim was to assess the validity of the corporate governance model of Mexican companies. A correlation analysis was subsequently performed via Pearson’s coefficient for the dependent variable of times issued and the variables of age and sales, disaggregating the same information by sector. Then, an ordinary least squares (OLS) analysis was performed to determine the possible linear regression of the variables described. Next, binomial (either issued or did not issue shares) logit and probit models were run on the same variables that fit the parametric techniques. Finally, inferential statistical analysis was performed via one-factor ANOVA to determine whether the mean number of times shares were issued differed significantly between the groups of companies analyzed by economic sector, age, and sales (^{Walpole et al., 2012}).

Source: Authors’ own elaboration.

Figure 1 Methodology of Analysis Applied in the Study 

3.5. Research Objective and Hypothesis

The objective of this study was to determine whether the Mexican business model of corporate governance based on share ownership by family or affinity groups continues to influence companies not to issue new shares as a form of financing. We also sought to identify whether there were differences in the decision to issue new shares by groups of companies analyzed by economic sector, age, and sales.

In this context, the hypotheses of this study are as follows:

Corporate Governance:

H1: Mexican public companies issue shares as a significant form of financing.

Age:

H1: There is a statistically significant relationship between age and share issuance in MPCs.

Level of Sales:

H1: There is a statistically significant relationship between the level of sales and the issuance of shares in MPCs.

Economic Sector:

H1: There is a statistically significant relationship between MPCs in the economic sector and their issuance of shares.

3.6. Research Design

Because of its characteristics, this research adopts a quantitative approach with a correlational scope to determine the degree of the relationship between the independent variables and the dependent variable. The research design is nonexperimental and transient (^{Hernández-Sampieri and Mendoza, 2018}).

4.1. Descriptive Statistics

Table 2 presents the basic statistical analyses of the study variables. Notably, the average number of times companies issued shares was 0.74, while the maximum was 5, and the variation among companies was significant, with a standard deviation of 1.3 times the number of issuances. The average age of the companies is 38.09 years, but the variability of the ages is considerable, ranging from 2 to 122 years, with a standard deviation of 23.89 years.

4.2. Testing the corporate governance model on the number of times shares were issued

Table 3 shows that nine companies did not have information because they were suspended or lacked the relevant information, resulting in a total census of 136 companies. In the population studied, we found that 66.2% (90 units) of MPCs listed on the BMV did not issue shares even once. However, the remaining 33.82% (46 units) of the companies issued shares between one and five times.

Table 4 shows the breakdown of companies that issued shares and those that did not by sector. We see little variation in the percentage of MPCs that issued new shares in the manufacturing (34.43%) and service (37.10%) sectors, unlike in the commerce sector, where a clear tendency is identified for the number of them to be lower in terms of those issuing new shares (15.38%).

Figure 2 shows that 32.46% of total issuances were destined for release to the general public. The preferred issuance of shares to existing major shareholders was 22.81%, and the other objectives included smaller percentages of shares issued for various purposes, such as conversion of debentures (debt), employee incentives, distribution of dividends, mergers with other companies, preferential purchase rights, or new contributions from existing shareholders. Thus, Mexican companies’ corporate governance models are similar, as ^{Donelli et al. (2013)} stated that Chilean companies’ shares are blocks directed to major shareholders.

Source: Authors’ own elaboration.

Figure 2 Objective of Issuance of Shares by Mexican Public Companies 2012-2022 

While these objectives provide a good impetus for a company’s sustainability, its main objective is not to increase the number of shareholders in a free and competitive manner. Furthermore, although 32.46% of the total share issuances were destined for the general public, the aforementioned percentage is exclusively 33.82% of the total MPCs listed on the BMV. Thus, we can infer that the growth in openness to the issuance of shares by MPCs that are effectively released among the public and that indicate a change in the family corporate model is still incipient. This coincides with ^{Watkins and Flores’s (2016)} findings from their study of Mexican companies, since the level of major shareholding remains a common feature.

The bars in Figure 3 show the percentage of shares issued concerning each company’s total number of shares, and the line shows the integral percentage of total issuances. It was observed that 14.04% of the total issuances were made for an amount representing only 0.99% of the total equity invested in shares. A total of 28.08% of total issuances were made for amounts up to only 4.99% of existing shares.

Source: Authors’ own elaboration.

Figure 3 Percentages of Shares Issued Concerning the Total Shares Existing in Each MPC 

However, 59.65% of the total issuances were made to increase the capital invested in shares to a maximum of 20% of the existing capital. The following issuance levels decrease dramatically from a proportion greater than 50% of the invested capital. That is, very few companies manage to issue shares that generate a significant change in the corporate governance of MPCs by having more shares in circulation for the public.

When we analyze the objectives of issuing new shares, it is inferred that the tendency of companies to share their corporate governance is lower. Given the total number of issuances, 67.54% are not actually due to the issuance of shares to the general public; therefore, the trend found is the preference for issuance with control of allocations. In other words, there is no significant increase in the participation of new shareholders that could form part of the company’s top-level decision-making body. In isolated cases, we can conclude that some companies already have an incipient openness to issuing new shares as a financing mechanism, particularly when analyzing the percentages of share issuance relative to the total number of shares outstanding at the time of the new issuance.

4.3. Trend in the Issuance of New Shares

Given the above findings, the next objective was to identify the possible relationships, correlations, variabilities, or linear regressions that might exist between the tendency to issue new shares, the quantitative variables of age and sales, and the categorical variable of the sector.