Alexandre Di Miceli da Silveira

Endogeneity of Brazilian corporate governance quality determinants

Purpose – This paper aims to investigate the determinants and the evolution of voluntarily adopted firm‐level corporate governance practices in Brazil from 1998 to 2004 using broad corporate governance scores.Design/methodology/approach – The authors employ a robust panel‐data procedure that accounts for the main sources of endogeneity to a very representative panel of Brazilian firms over a six‐year period. They address the endogeneity that arises from the simultaneous determination of the quality of corporate governance practices, the dependent variable, and possibly several firm attributes that are commonly employed as the determinants of such practices and are supposedly independent. Specifically, theoretical arguments and empirical evidence strongly suggest that the quality of corporate governance practices may influence some of the variables commonly used as its determinants just as much as they may be influenced by them.Findings – The paper finds that firm‐level corporate governance practices are s...

Estrutura de governança e valor das companhias abertas brasileiras

Corporate governance seeks to increase the probability that suppliers of financial resources will assure themselves the return on their investment through a set of mechanisms including the Board of Directors. This paper investigates if the governance structure was important to the value of Brazilian listed firms from 1998 to 2000. Three governance variables were considered: the separation of chief executive officer and chairman positions (DE), board size (TOT), and board independence (Indep). The multiple regression method with cross sectional data was applied. The variable chief executive officer as chairman (DE) showed the most important results, with evidence that, on average, firms with different people in charge of the chief executive officer and chairman positions have higher market value.

Governança Corporativa e os determinantes da estrutura de capital: evidências empíricas no Brasil

This study empirically investigates the influence of a firms Corporate Governance practices [CG] over its capital structure. Governance quality is measured by a broad index proposed in previous research and constructed for a sample of Brazilian publicly traded companies. We explicitly model the possible bidirectional causality between the constructs of interest, because, as suggested by the specialized literature, capital structure can influence the adoption of certain CG practices by the firm. The postulated systems of equations also include various potential determinants of both capital structure and GC quality suggested by prior research. The equations were estimated by the TOBIT, Ordinary Least Squares, and Three-Stages Least Squares methods. Our results show a significant positive influence of CG practices over financial leverage, in particular of those practices related to the dimension ownership structure and board of directors, suggesting that CG can be an important determinant of capital structure. The results are not conclusive, on the other hand, regarding the influence of leverage over the full CG index and over two sub-indices derived from it.

Governança corporativa: custos de agência e estrutura de propriedade

A estrutura de propriedade e os confl itos de interesse na alta gestão das empresas sempre estiveram no centro das discussões sobre governança corporativa. O próprio trabalho de Berle e Means (1932), considerado por muitos o marco inicial em governança corporativa, teve como objetivo analisar empiricamente a composição acionária das grandes empresas norte-americanas e discutir os inevitáveis confl itos de interesse que estruturas de propriedade pulverizadas, tais como as encontradas, poderiam acarretar para o desempenho e valor das companhias. Por meio de sua obra The Modern Corporation and Private Property, Berle e Means (1932) foram os primeiros a discutir os benefícios e custos potenciais da separação entre propriedade e controle já vigente em algumas grandes corporações. Entre os custos potenciais, os autores observaram que a pulverização da propriedade fortaleceria o poder dos gestores, aumentando as chances de os mesmos agirem em seu próprio interesse, e não no interesse dos acionistas. O desenvolvimento da linha de pesquisa em governança corporativa dependia, portanto, da criação de uma teoria da fi rma que deixasse de analisar as empresas como caixas-pretas e passasse a explicar como a alocação de capital entre os acionistas e os objetivos confl itantes de participantes individuais dentro das companhias levariam a determinadas situações de equilíbrio. Durante o século XX, desenvolveram-se estudos em áreas correlatas que ampliaram a compreensão do funcionamento das empresas. Entre esses estudos, destacam-se os trabalhos sobre direitos de propriedade e teoria dos contratos de Coase (1937, 1960), Alchian (1965, 1968), Alchian e Demsetz (1972), Preston (1975) e Klein (1976), e os trabalhos pioneiros sobre custos de agência de Wilson (1968), Ross (1973) e Heckerman (1975). Apesar da indiscutível relevância dos trabalhos anteriores, o trabalho de Jensen e Meckling (1976) é, sob o ponto de vista da economia fi nanceira, considerado seminal na linha de pesquisa em governança corporativa, um verdadeiro divisor de águas a partir do qual foram desenvolvidos inúmeros trabalhos empíricos e geradas novas modelagens teóricas. Especifi camente, o trabalho de Jensen e Meckling (1976) apresentou três contribuições principais: i) a criação de uma teoria de estrutura de propriedade das companhias baseada nos inevitáveis confl itos de interesse individuais e com predições testáveis empiricamente; ii) a defi nição de um novo conceito de custos de agência, mostrando sua relação com a separação entre propriedade e controle presente nas empresas; e iii) a elaboração de uma nova defi nição da fi rma, descrevendoa como uma mera fi cção legal que serve como um ponto de ligação (nexus) para um conjunto de relacionamentos contratuais entre os indivíduos. Sob uma perspectiva mais ampla, o trabalho de Jensen e Meckling (1976) contribuiu para a própria defi nição do termo “governança corpora-

Atributos corporativos e concentração acionária no Brasil

This article focuses on the possible determinants of the concentration of the right to vote and the rights over cash-flow of the controlling shareholders of publicly-quoted Brazilian companies. The analysis investigates if endogenous variables of firms and sectors mean that some companies have a more concentrated corporate structure than others that undergo the same contractual environment. When empirical tests were applied to a panel of 161 companies between 1998 and 2002, the variables that were tested as possible determinants seem not to have an influence on the shareholder concentration of the owners of the companies that were analyzed. The results offer evidence in favor of the hypothesis of the influence of the exogeneity of the ownership structure on corporate performance, which has been used in recent work.

Board Interlocking in Brazil: Directors' Participation in Multiple Companies and Its Effect on Firm Value and Profitability

ABSTRACT This article investigates the simultaneous participation of directors in 320 Brazilian-listed companies in 2001, 2003, and 2005. Our results show that interlocking directorates are a common practice in Brazil. Firm value is, on average, negatively impacted by interlocking directorships, especially in firms in which a majority of directors hold three or more board positions. We also find evidence of a nonlinear relationship between interlocking and return on assets, consistent with the hypothesis that low and moderate levels of this practice may be beneficial to a company, while a high degree of interconnectedness among directors is likely to hurt performance.

The Relevance of Tag along Rights and Identity of Controlling Shareholders for the Price Spreads between Dual-Class Shares: the Brazilian Case

This paper analyzes the determinants of the differe ntial pricing of equity classes (the so-called dual -class premium [DCP]) in Brazil from 1995 to 2006 with a focus on two specific corporate governance aspects: i) the granting of tag along rights, a mandatory bid rule that extends to minority shareholders the right to sell their shares in case of a control transfer; and ii) the i dentity of the controlling shareholders, with an em phasis on family control. We examined 87 Brazilian listed fir ms throughout the period, resulting in a sample of 3,287 observations. We found empirical evidence that changes in Corporate Law decreased (increased) the adva ntage of voting shares in terms of tag along rights reduc ed (incremented) DCP. However, we did not find empirical evidence that the voluntary granting of tag along r ights altered DCP. We also found evidence suggestin g that family control is positively associated with DCP le vel. Overall, our results indicate that regulations regarding shareholders’ rights and the identity of controllin g shareholders are the two relevant corporate gover nance variables for DCP level in environments characteriz ed by concentrated ownership structures.

Corporate Governance Quality and Firm Value in Brazil

This paper investigates the influence of corporate governance quality on market value of 154 Brazilian listed companies in 2002. In order to obtain a proxy for corporate governance quality, a broad governance index was built. The investigation was carried out by different econometric approaches in increasing order of complexity, including multiple regressions by Ordinary Least Squares (OLS), instrumental variables approach and systems of simultaneous equations. The results obtained in all econometric approaches show a positive and significant influence of corporate governance quality on firms market value. OLS results with market value variables Tobins Q and PBV multiple suggest that, ceteris paribus, a worst-to-best change in governance quality would result in a market capitalization increase of around 85% and 100%, respectively. The paper also finds evidence of corporate governance variable endogeneity and proposes different instruments for estimation by instrumental variables approach. Moreover, results by simultaneous equation approach indicate a relation of reverse causality between corporate governance quality and firm valuation.

Board Interlocking in Brazil: Directors' Participation in Multiple Companies and its Effect on Firm Value

This paper investigates the simultaneous participation of directors in different companies from a sample of 320 Brazilian listed firms in 2001, 2003 and 2005. We identify which firms are connected through a network of directors, which corporate characteristics contribute to this phenomenon, and if board interlocking influences firm value and profitability. Our results show that interlocking directorates is a common practice in Brazil among listed firms. Besides, larger boards, more dispersed ownership structures, and larger firm size are associated with higher levels of board interlocking. We also find that firm value is, on average, negatively impacted by interlocking, especially in firms with a “busy board” (when a majority of directors hold three or more directorships) or in firms where the CEO holds directorships in other companies. Overall, this paper provides support for the elaboration of governance guidelines by regulators regarding the consequences of interlocked directorates for corporate value.

Facing the Regulators: Noncompliance With Detailed Mandatory Compensation Disclosure in Brazil

Abstract A preliminary court injunction based on alleged personal security risks gave Brazilian public companies the option of noncompliance with new executive and director compensation disclosure rules. We find that noncompliance is possibly motivated by agency conflicts and not by crime rates in the state where the company is headquartered. Noncompliers tend to present lower corporate governance (CG) quality, higher ownership concentration, larger total assets, and less profitability. State- and foreign-owned companies are significantly less likely noncompliers. Shareholders correctly anticipated that lower CG quality firms were more likely noncompliers but may have been negatively surprised when some higher CG quality firms did not comply.