Irregularities and the Market Value of Companies

Abstract

Purpose: To investigate the impact of the irregularities under analysis and/or judged in the sanctioning administrative proceedings of the Securities and Exchange Commission on the market value of Brazilian companies. Thus, we used the signaling theory to analyze how stakeholders interpret situations and where the available information is asymmetric and incomplete among market agents. Originality/value: The study was based on the assumption that the conviction within the scope of the regulatory body can negatively affect the company’s reputation and value. Empirical evidence indicates that irregularities affect market sentiment. On the other hand, the company can present a better market value if an effective and efficient corporate governance is established, aligning the interests of stakeholders and management. Design/methodology/approach: Information was collected with quarterly data covering the period from 2010 to 2018. Two hypotheses were tested by means of regression analysis in OLS with pooled data, panel - fixed effects and 2SLS. Findings: The results indicated that the irregularities, in the analyzed period, did not impact the companies’ market value in the estimation by MQ2E. We suggest to the chief executive officer (CEO) and the chief financial officer (CFO) that they assess the level of corporate governance of their companies and invest in the search for excellence since the best levels of governance bring a positive signal to the market. The CEO is advised to pay attention to the fact that good governance is not enough to keep companies from being irregular.

Scientific Production on Fraud in Brazil: An Investigation From the Perspective of Social Network Analysis

“…Pesquisas revelam que a estrutura de GC das empresas impacta na diminuição de fraudes nos relatórios contábeis (Borges & Andrade, 2018;Machado & Gartner, 2018;Martins & Ventura Júnior, 2020;Santos et al, 2020), seja de maneira direta ou indireta, mediante a redução das probabilidades de falência ou de manipulação de resultados. Constata-se também que as práticas de GC, relacionadas ao Conselho de Administração, são mais eficientes contra a probabilidade de falência, ao passo que as práticas relacionadas à auditoria estão mais relacionadas à mitigação da manipulação de resultados fraudulentos (Martins & Ventura Júnior, 2020).…”

Relação Entre Qualidade De Auditoria E Irregularidades Contábeis E Financeiras Nas Empresas Brasileiras Listadas Na B3

“…As variáveis de controle foram selecionadas baseando-se em pesquisas prévias, a exemplo de Felix e Teixeira (2021); Santos et al (2020), Faustino e Damasceno (2020) e Lennox et al (2013). Lennox et al (2013) sugerem o controle, tanto do Tamanho da Empresa (ln_tamit), quanto da Alavancagem (alavit), pois são variáveis que podem afetar a magnitude da reação do mercado.…”

Relação entre divulgação de ações regulatórias de propósito sancionador e a rotatividade de CEO

“…It conducts administrative proceedings that may result in sanctions and the application of punishments to offending agents. Although these so-called administrative sanctioning proceedings (or PAS) refer to administrative mechanisms, they do not prevent offenders from being held accountable for wrongdoings in civil or penal courts (Santos et al, 2020). As mentioned before in this article, CVM's PAS have been classified into three types over the years: ordinary, summary (until 2017), and simplified (since 2017) proceedings.…”

“…Correspondingly, fines were the most common penalties imposed by the CVM. Santos et al (2020) studied the impact of irregularities under analysis and/or judged in PAS on the market value of Brazilian companies, concluding that the irregularities that occurred in the analyzed period did not impact the market value of Brazilian companies.…”

“…CEO turnover classified as forced, voluntary departure, and the possibility of retaining the CEO were explored in studies by Parrino (1997), Campbell et al (2011), Hazarika et al (2012, and Matos and Colauto (2017). From another perspective, Brazilian studies by Fontes (2013), Fusiger et al (2015, Melo et al (2017), Borges andAndrade (2019), andSantos et al (2020) focused on carrying out descriptive surveys of regulatory actions in the Brazilian capital market scenario, without taking CEO turnover into account.…”