Paulo Renato Soares Terra

Determinants of Corporate Debt Maturity in South America: Do Institutional Quality and Financial Development Matter?

We test whether a countrys level of financial development or institutional quality (or both) has a first‐order effect on corporate debt maturity decisions on a sample of 359 non-financial firms from five South American countries over a 12‐year period. We find that there is a substantial dynamic component in the determination of a firms debt maturity, and firms face moderate adjustment frictions toward their optimal maturities. More importantly, the level of financial development does not influence debt maturity, whereas the institutional quality of a country has a significant positive effect on the level of long-term debt in a firms financial structure. Our results support the hypothesis that the quality of national institutions is an important determinant of corporate financing in general and of debt maturity in particular.

Translation and validation of the Graham-Harvey survey for the Brazilian context

Purpose - The purpose of this paper is to report on the systematic translation and content validation method used to produce the Brazilian Portuguese version of the Design/methodology/approach - In accordance with the requirements for cross-cultural application of surveys, the paper accounts for obvious differences in language, culture, and the institutional setting and employ well-known techniques from the field of psychology, such as the use of backtranslation, to ensure faithfulness to the original survey. A panel of experts served as judges in evaluating the clarity of language and the practical pertinence and theoretical dimensions of the questionnaire. Coefficients of content validity for each item and for the instrument as a whole are reported. Findings - The results illustrate how a questionnaire designed for one country should be rigorously translated and validated prior to use in another country. Research limitations/implications - Although the content validity of the translated version of the Originality/value - This paper explores the field study method in finance by borrowing from the vast experience of psychology research in the rigorous translation and validation of survey instruments. This study also highlights the similarities and differences in the interpretation of questions between emerging and developed markets.

Determinants of Corporate Debt Maturity in Latin America

In this paper, I investigate the choice of debt maturity of the firm for a set of countries of Latin America employing dynamic panel data analysis to a sample of 986 non-financial firms from Latin America and 977 from the United States over a 16-year period. Most empirical work in this subject has focused on developed countries, in particular the United States. Also, it is an opportunity to verify the applicability of some of the theories of maturity structure in a multi-country setting. My main findings are that there is a substantial dynamic component in the determination of a firms maturity structure, firms face moderate adjustment costs towards its optimal maturity, and the determinants of maturity structure and their effects are similar between Latin American countries and the United States, despite obvious differences in the financial and business environments of these countries.

Determinants of Voluntary Executive Stock Option Disclosure in Brazil

This study investigates whether the governance attributes of Brazilian companies are associated with voluntary executive stock option (ESO) disclosure. Results show that Brazilian companies voluntarily disclose very little about their ESO plans, and that board size, presence of a compensation committee, and auditing by a Big 4 firm are significantly related to the degree of voluntary ESO disclosure. We also show that family-controlled companies in Brazil are associated with low voluntary ESO disclosure. Results are robust to a number of specification tests, dependent and explanatory variable measurements, and sample composition. This study has professional and regulatory implications for Brazil and other emerging capital markets. The results underscore the need for stricter rules for executive compensation reporting in Brazil, and they invite policy makers and regulators in emerging markets to consider the effects of company-level governance factors on disclosure incentives.

Estrutura de capital e fatores macroeconômicos na América Latina

Evidencias empiricas recientes sugieren que factores especificos de cada pais son importantes determinantes de la estructura de capital en mercados emergentes. Dichos factores especificos incluyen la infraestructura institucional, las practicas legales y contables, la infraestructura financiera y el ambiente macroeconomico. En ese estudio, se investiga en que medida los factores macroeconomicos son determinantes de la estructura de capital de una muestra de empresas de siete paises latinoamericanos: Argentina, Brasil, Chile, Colombia, Mexico, Peru y Venezuela, en el periodo de 1986 a 2000. A partir de diversas medidas de apalancamiento en un analisis de datos en panel, los resultados senalan que los factores especificos de cada pais, aunque importantes, no son determinantes decisivos del endeudamiento, como sugieren estudios previos. Ademas, factores especificos de cada empresa sobresalen como los principales determinantes de la estructura de capital en la muestra de empresas investigada.

Building resilience to international financial crises: lessons from Brazil

Purpose – This paper sets out to argue that, due to a stable set of economic policies over the past decade, today Brazil is much more resilient to international financial crises than in the 1990s.Design/methodology/approach – The paper presents preliminary macroeconomic data in a country case study.Findings – The paper concludes that the initial impact of the current international financial crisis on Brazil has been much less severe than similar crisis episodes in the past.Research limitations/implications – Given that the crisis is still unfolding, the paper presents only preliminary data regarding its impact on emerging markets.Practical implications – The paper suggests that emerging markets should adopt flexible exchange rate regimes and stable macroeconomic policies as a means to reduce their exposure to international shocks.Originality/value – The paper makes an initial diagnosis regarding the impact of the international financial crisis on emerging markets that have adopted sensible economic polici...

Are leverage and debt maturity complements or substitutes? Evidence from Latin America

The aim of this paper is to investigate the choice between debt and equity simultaneously with the decision between short- and long-term debt for a large sample of emerging markets from Latin America. In order to do this, we test a model (BARCLAY; MARX; SMITH JR., 2003) of joint capital structure and debt maturity determination for a sample of 986 firms from Latin America in the period 1990-2002, employing the Generalized Method of Moments on a system of equations. The empirical results support three main findings. First, capital structure and debt maturity are financial policy complements in Latin America. Second, there is a substantial dynamic component in the determination of debt maturity that has been neglected by previous research. Finally, firms face moderate adjustment costs towards their optimal maturity. Results are robust to variation in sample composition in terms or countries, industries, and years.

Country‐Level Governance Quality, Ownership Concentration, and Debt Maturity: A Comparative Study of Brazil and Chile

Manuscript type Empirical Research Question/Issue This study investigates the interplay between country-level governance quality and the capital structure choice at the firm level in Brazil and Chile. We examine the association between a firms ownership concentration and its debt maturity structure and whether country-level governance quality influences this association. Research Findings/Insights Using a large firm-level dataset from Brazil and Chile for the period 2008–2013, we find a positive association between low ownership concentration and debt maturity. However, this association becomes negative when the largest shareholder has high ownership concentration. This result suggests that long-term debt and ownership concentration act as substitute monitoring mechanisms. Moreover, debt maturity is inversely related to our aggregated index of country-level governance quality, suggesting that in countries with governance systems that effectively protect debt holders, firms with high benefits of control (high ownership concentration) will use debt with shorter repayment periods in order to benefit from frequent monitoring by debt holders. Overall, our results support the view that financial markets tend to pressure firms with high benefits of control or greater agency conflict to make a tradeoff between the benefits of control and the cost and maturity structure of debt financing. Theoretical/Academic Implications This study contributes to the research on comparative corporate governance and capital structure. We also respond to recent calls to bridge the gap between under- and over-socialized views of corporate governance by examining the interplay between firm- and country-level governance variables. Our findings suggest a substitution effect between monitoring by equity holders and by debt holders, and that country-level governance quality exerts a disciplinary influence over a firms choice of debt maturity structure. Practitioner/Policy Implications Investors seeking to enter emerging markets such as Brazil and Chile can benefit from considering national governance factors that enhance debt holders’ external monitoring effectiveness. Because our findings show the importance of considering and improving the quality of country-level governance, they are also useful for policy makers aiming to reform corporate governance practices in emerging markets.

Revisiting the Causality between Stock Returns and Inflation: Evidence from Advanced and Emerging Markets

Different explanations have been suggested for the puzzling negative relationship observed between stock returns and inflation. The most popular ones have been the Tax-Effects Hypothesis (Feldstein, 1980), the Proxy Hypothesis (Fama, 1981), and the Reverse Causality Hypothesis (Geske and Roll, 1983). Distinguishing the causal chain between the variables is crucial to sort out which hypothesis best fits the data. This paper employs a VAR approach to investigate the causality relationships among inflation, stock returns, interest rates, and real activity in a sample of seven Latin American developing countries and seven industrial countries. Extant empirical research employs mostly advanced economies data, and only a few uses emerging markets data. The main findings indicate that the differences between industrial and developing countries are not as sharp as one might initially presume, with slightly more support to the Reverse Causality Hypothesis. Also, the results do not in general support previous findings that are largely based on United States data, even among other industrial countries.

UM ESTUDO EMPÍRICO SOBRE AS PERSPECTIVAS DE AMPLIAÇÃO DAS RELAÇÕES COMERCIAIS ENTRE BRASIL E CHINA

This paper identifies those Brazilian products, at six-digit level of NCM, with greater perspectives of increasing their exports to China, through the evaluation of the Brazilian export competitiveness and the Chinese import dynamism. The analysis of Brazilian competitiveness is based on the Index of Revealed Comparative Advantage (RCA), while the Chinese import dynamism is obtained by looking at those products which showed the greater increase in imports in the period 2000-2007, which coincides with China accession to WTO. Both indicators consider the HS classification at 06 digit level, in the years 2000, 2004, 2005, 2006 e 2007. Besides, it was identified the technological intensity degree of those Brazilian products with major potential of exports growth to China. From an universe of more than 5 thousand products, only 92 satisfied both criteria, being both competitive in Brazil and dynamic in the Chinese market, with great possibilities to increase the bilateral trade. It was possible to note that the Brazilian exports to China are highly concentrated in few products, especially ores, soy, cellulose and vegetable oils, where it shows comparative advantage and China a strong import growth, which Chinese imports seems to be intense in those products in which Brazil shows competitiveness.