**1. Introduction**

For several years, explanations have been sought to describe the behavior of stock prices in markets as well as the reasons for their valuation changes. Consequently, the analysis of financial and market information is relevant [1]. Financial information presented by companies allows the elaboration of different ratios that are useful for academicals porpoises and for investors. This analysis can be done to compare variations in valuation over several years

© 2016 The Author(s). Licensee InTech. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. © 2018 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

for the same company, to compare companies from the same country within a sector or to compare a sector in different countries. Regional analysis is interesting because it allows us to detect different behaviors within the companies that operate in similar environments.

share's prices in markets, volatility and finally traded volume. The approach adopted follows

Effect of Free Float Ratio on the Behavior of Shares Valuation in Companies Listed in Latin…

http://dx.doi.org/10.5772/intechopen.76421

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The study is carried out in companies whose shares are part of the most representative indexes of Latin American markets—from Argentina, Brazil, Chile, Peru and Colombia. The reason why shares of these indices are studied is because they are the ones that have greater stock market presence. According to what is mentioned on O'shee et al. in Latin America, two important aspects characterize the ownership and control structures. In the first place, companies show a high degree of ownership concentration and second, many firms are indirectly

The model proposed analyze data corresponding to 181 companies of the selected Latin Americans indices and applies three simple linear regressions, where the explanatory variable is always the magnitude of the free float ratio, and response variables are the share price variation, the share price volatility and the traded volume. Before applying the model, a descriptive analysis of the variables used in each selected country is carried out to contextualize the results obtained. The results show that there are diverse conclusions for each country and for the different regressions implemented. It will be possible to repeat the same analysis

This chapter has been organized in five parts. In the first part, we introduce the topic that will be investigated, in the second part, we mention the literary revision of works on different capital markets, the third part describes the methodology followed at work, the fourth part

Çalişkan y Kerestecioğlu defined free float as the number of outstanding shares minus shares that are restricted from trading. The free float ratio is the quantity of shares available for public trading. Shares that are restricted from trading are called stable shareholdings, and include shares held by a parent company for control of a subsidiary, shares held by the government, and cross-shareholdings among companies. It has been said that the relationship between ownership structure and corporate performance has been a popular subject for researchers recently. Ownership structure studies mostly focus on firm performance, which is typically

On the other hand, free float ratio studies examine the market performance of stocks. Free float ratio gives information about the ownership structure of a company. A low free float ratio indicates a concentrated ownership structure as well as a small and shallow market for stocks of that company. Free float ratio can affect stock prices in two ways. First, if the free float ratio is low, investors will tend to avoid that stock. Secondly, lower free float ratio means that there is less amount of shares in the market, which might cause low liquidity in the market for that stock. Investors dislike illiquidity. The authors examined the effect of free float ratio on market performance of stocks in Turkey. They attempt to answer the following questions; first, how much do free float ratios affect stock prices of selected firms? Second, do free float ratios affect

shows the results obtained and finally the fifth one presents the conclusions.

defined by accounting profit, or other metrics based on financial statements.

controlled by industrial and financial conglomerates that operate in Latin America.

the methodology of Çalişkan and Kerestecioğlu.

next year and verify the conclusions observed.

**2. Literature review**

Using financial information from different items of companies' assets, liabilities and earnings allows us to analyze profitability ratios, returns persistence, debt ratios and companies solvency [2, 3]. The return ratio on equity is usually considered by investors and analysts, since it measures profitability of the resources contributed by the owners. There is a perception that the higher the return on equity, the better will be the performance of share prices. However, this hypothesis is not proven by previous empirical research since high values of ratios do not always lead to higher returns on shares [4].

For the purpose of measuring the size of a company, we use the concept of stock market capitalization, defined as the market value of an enterprise. This provides an interesting fact because it is the capital of the company multiplied by the price of it equities in the stock market, and therefore, it is a way of quantifying the size of the capital market. The total market capitalization is the sum of all companies' capitalizations that quoted at a certain date.

It is important to measure market capitalization in absolute terms and in relative terms related to the gross product of each country in order to observe its behavior and draw conclusions [1]. Now that capital is owned by different shareholders, with different characteristics. Nevertheless, there is no doubt that the ownership structure of traded shares in markets can have its effects [5].

Hardouvelis and Karalas (2016) [6] mentioned the importance of the presence of institutional investors in markets and the impact of this on prices. They remarked that the percentage owned by institutional shareholders increased dramatically from about 45% average in the mid-90s to about 80% in recent years. Then, different authors [7] asserted that the intervention of governments affects the liquidity in markets because of different measures adopted that are related to the countries economical evolution.

In the case that the shareholders are state agencies, decisions are taken differently from institutional investors in general because they do not act freely in the market. They have to complete with certain standards in each country.

In Argentina, it is observed in companies listed that in addition to the concentration observed in the capital by majority shareholders, there exists the Sustainability Guarantee Fund (FGS) created in 2009 after the National Senate approved the reform of the Argentine Pension System, which implied the disappearance of private retirement and the Retirement and Pension Funds Administrators (AFJP). In 2016, Law No. 27260 in a National Program of Historical Reparation affects the resources of the Sustainability Guarantee Fund of the Argentine Social Security System for Retirees and Pensioners. Therefore, this fund can generate an offer of shares in the market but not with periodicity, affecting market liquidity. For this reason, it is possible to consider the adjusted floating capital by subtracting the holding portion of the FGS.

Other studies quantify the performance of the company as of its accounting profitability, in relation to the property concentration [5], but in this chapter, the analysis is oriented to the magnitude of the floating capital. The aim is to demonstrate the effect of floating capital on the share's prices in markets, volatility and finally traded volume. The approach adopted follows the methodology of Çalişkan and Kerestecioğlu.

The study is carried out in companies whose shares are part of the most representative indexes of Latin American markets—from Argentina, Brazil, Chile, Peru and Colombia. The reason why shares of these indices are studied is because they are the ones that have greater stock market presence. According to what is mentioned on O'shee et al. in Latin America, two important aspects characterize the ownership and control structures. In the first place, companies show a high degree of ownership concentration and second, many firms are indirectly controlled by industrial and financial conglomerates that operate in Latin America.

The model proposed analyze data corresponding to 181 companies of the selected Latin Americans indices and applies three simple linear regressions, where the explanatory variable is always the magnitude of the free float ratio, and response variables are the share price variation, the share price volatility and the traded volume. Before applying the model, a descriptive analysis of the variables used in each selected country is carried out to contextualize the results obtained. The results show that there are diverse conclusions for each country and for the different regressions implemented. It will be possible to repeat the same analysis next year and verify the conclusions observed.

This chapter has been organized in five parts. In the first part, we introduce the topic that will be investigated, in the second part, we mention the literary revision of works on different capital markets, the third part describes the methodology followed at work, the fourth part shows the results obtained and finally the fifth one presents the conclusions.
