Determinants of Voluntary Executive Stock Option Disclosure in Brazil

Schiehll, Eduardo; Terra, Paulo Renato Soares; Victor, Fernanda Gomes

doi:10.2139/ssrn.1724895

Cited by 7 publications

(10 citation statements)

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“…On Control of Corruption and Regulatory Quality, Chile scores higher than even the US. In contrast, Brazil's laws, regulations, and governance codes are either in development or ineffectively enforced (Schiehll, Terra, & Victor, 2013). The Heritage Foundation considered Brazil the 118th freest economy in 2015, with Chile coming seventh (Miller & Kim, 2015).…”

Section: Samplementioning

confidence: 99%

“…We therefore contend that Brazil and Chile provide a unique natural setting for examining our research hypotheses on the interplay between country-and firm-level governance mechanisms, more specifically, debt maturity and ownership concentration. Chile has the strongest national governance practices in Latin Americaa "well developed" national governance systemwhereas Brazil has the largest Latin American economy but governance practices that are still evolving, and its national governance system is considered "underdeveloped" (Schiehll et al, 2013). A further advantage of focusing on these two Latin American countries is that we can better control for variations in certain primary environmental factorsin this case, variables that capture the quality of national governancewhile keeping constant a range of other, equally important country-level factorssuch as culture, development level, legal origin, and historythat could potentially blur the investigated associations (Schiehll & Martins, 2016).…”

Section: Samplementioning

confidence: 99%

“…Descriptive Statistics of the Dependent Variable Debt Maturity a (e.g.,Aguilera et al, 2012a), which would not be captured by an index based solely on the country's legal system. Examples include the "New Market" special listing section of the São Paulo Stock Exchange (BM&FBovespa) and the amendments to the Brazilian Corporate Law (more details inAguilera, Desender, & Kabbach de Castro, 2012b;Schiehll et al, 2013).…”

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Country‐level governance quality, ownership concentration, and debt maturity: A comparative study of Brazil and Chile

Martins

Schiehll

Terra

2017

Corporate Governance

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Manuscript type EmpiricalResearch 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 firm's 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 firm's 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.

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Section: Samplementioning

confidence: 99%

Section: Samplementioning

confidence: 99%

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Country‐level governance quality, ownership concentration, and debt maturity: A comparative study of Brazil and Chile

Martins

Schiehll

Terra

2017

Corporate Governance

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“…Bovespa, represents our group of interest. Recent research finds that Brazilian firms remain relatively opaque thanks to the protection of the court injunction (Schiehll et al, 2013). Appendix B provides a list of the companies taking advantage of the injunction.…”

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confidence: 99%

Non‐compliance in Executive Compensation Disclosure: the Brazilian Experience

Costa¹,

Galdi²,

Motoki³

et al. 2016

Business Fin & Account

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We examine the determinants and consequences of firms’ choice not to comply with a new executive compensation disclosure regulation. We exploit a unique feature of Brazilian markets, where a change in the regulation of executive compensation disclosure could arguably lead to personal security‐related costs for executives. This major reform in executive compensation disclosure in Brazil became effective in December 2009. While some firms complied with the change in regulation, other firms explicitly refused to comply fully with the regulation by using a court injunction. After controlling for firm‐specific characteristics and both social and economic inequality measures, we find that the degree of criminality in the state in which the firm is headquartered (a proxy for security‐related costs) and the level of CEO compensation are important determinants of a firm's decision not to fully disclose executive compensation information. We also show that firms which do not fully comply with the regulation face costs in the form of higher bid‐ask spreads, suggesting investors are leery of the decision not to comply with the regulation. We discuss the potential implications of our results in the context of executive compensation disclosure reform.

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“…Lipton and Lorsch (1992) state that when BS goes beyond 10, it becomes difficult for members to express their ideas and opinions within the limited time frame and thus suggested to limit BS up to 10. Empirically, Cerbioni and Parbonetti (2007) report a negative association between BS and VD for 54 biotechnology European firms, while studies from developing countries such as Brazil, Malaysia, Bangladesh, and Saudi Arabia exhibit a positive association between the two (Akhtaruddin et al, 2009; Al-Janadi et al, 2013; Nahar et al, 2016; Rouf, 2011; Said Mokhtar & Mellett, 2013; Schiehll et al, 2013). These studies also indicate that there is scarcity of qualified outside directors in developing countries whereby large boards provide firms with qualified pool of human resources, which in turn elevate their ability to provide more voluntary information.…”

Section: Review Of Theoretical and Empirical Literaturementioning

confidence: 99%

Corporate Governance and Voluntary Disclosure: A Synthesis of Empirical Studies

Saha

Kabra

2020

Business Perspectives and Research

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Voluntary disclosure (VD) is considered potentially important for efficient functioning of the capital market as it communicates firms’ performance and governance to shareholders and potential investors, which boost their confidence. This article attempts to provide a brief conceptual framework of VD and corporate governance (CG), and also reviews the empirical literature dealing with relationship between them. To this end, the article uses systematic electronic literature search method, which takes into account 65 empirical studies published over the period 1998–2018. An investigation of empirical findings points to some factors that may have contributed toward the apparent inconsistent findings observed to date. In particular, the article focuses on two intervening factors for variation of results—such as CG system and measurement of explanatory variables. The findings suggest that studies mostly from Anglo-Saxon system (ASS) show complementary relationship between different attributes of CG with VD, whereas in case of communitarian system, studies mostly depict an insignificant impact of CG attributes on VD except for few studies showing their positive/negative impact on VD. However, in case of emerging market system (EMS), some studies show substitutive relationship between board independence (BI) and VD while other CG attributes such as board size (BS), (GD), and audit committee independence (ACI) in most of the studies complement VD supporting the resource-based perspective. Furthermore, the association of ownership structure (OS) and role duality (RD) with VD is mixed. Another factor, which is considered to be added to variation of results, is measurement of explanatory variables whereby albeit studies employed same concepts, operational definition of variables intervenes into the relationship between CG and VD. The findings of this article provide some deeper insights about the complementary and substitutive relationships between CG and VD by integrating diverse empirical findings under different research contexts. Future research can extend to analyze some other institutional factors like investors’ protection rights and legal enforcement, which might also have played some role in influencing the relationship between CG and VD. Furthermore, it is also evident from the review that BS and BI are the most commonly studied CG attributes in relation to VD, whereas attributes like GD and ACI, despite their theoretical relevance and practical importance are least studied in relation to VD, thus signaling the need to focus on these attributes in future studies.

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Determinants of Voluntary Executive Stock Option Disclosure in Brazil

Cited by 7 publications

References 51 publications

Country‐level governance quality, ownership concentration, and debt maturity: A comparative study of Brazil and Chile

Country‐level governance quality, ownership concentration, and debt maturity: A comparative study of Brazil and Chile

Non‐compliance in Executive Compensation Disclosure: the Brazilian Experience

Corporate Governance and Voluntary Disclosure: A Synthesis of Empirical Studies

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