The Brazilian model of corporate governance is characterized by a highly concentrated ownership structure, which usually culminates in an overlap between ownership and management. According to the literature, the accumulation of shares by the controller(s) can affect corporate performance due to both the alignment (or incentive) effect and the entrenchment effect. At first, the presence of large shareholders is associated with benefits for an organization because it increases the effectiveness of management monitoring. However, very high levels of ownership concentration can allow controllers to dominate the corporation's decision-making process, which could result in the expropriation of wealth from minority shareholders. The relevance of the ownership structure as an internal mechanism of corporate governance motivates the present study. This article aims to test whether ownership and control concentration influences corporate market value. An unbalanced panel was used for the period from 2001 to 2010, composed of 237 Brazilian non-financial publicly traded companies, totaling 1,199 observations. Dynamic regression models were used, estimated by the System Generalized Method of Moments (Sys-GMM), to mitigate possible sources of endogeneity, such as the omission of variables, the feedback effect, and the simultaneity. A quadratic relationship was found between cash flow rights of the largest shareholder and firm market value. Moreover, the results indicate that the corrected market value of the total shares held by the largest shareholder captured the incentive effect, while voting rights concentration captured the entrenchment effect.
This study aimed to investigate the investment-cash flow sensitivity for
Brazilian companies with different degrees of financial constraint according
to the quality level of their corporate governance practices. An investment
model was estimated through GMM for a panel data of 248 Brazilian publicly
traded companies, which were a priori classified in two groups of financial
constraint degrees (high and low) according to the Corporate Governance
Practices Index (IPGC). The results showed that the quality of corporate
governance influences the investment-cash flow sensitivity, and this
sensitivity is negative and significant only for firms with poor governance,
classified with high financial constraint. Furthermore, it can be concluded
that IPGC proved to be an interesting variable for a priori classification
of companies and an important determinant of the investment-cash flow
sensitivity to identify potentially financially constrained firms.
This paper investigates whether the adoption of good corporate governance practices influences the market value of Brazilian firms. For this purpose, we used an unbalanced panel over the period from 2002 to 2010, composed of 233 listed nonfinancial companies, for a total of 1,110 observations. Because of endogeneity problems such as omitted variables, simultaneity and the feedback effect, we employed dynamic multiple linear regression models, estimated by the system generalized method of moments (System GMM). The results indicate that firms listed in one of the three premium corporate governance segments of the BM&FBovespa (Level 1, Level 2 and Novo Mercado) are priced higher by the market compared to firms listed in the traditional trading segment. Therefore, corporate governance has a positive effect on the market value of Brazilian firms.
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