Abstract
The purpose of this paper is to investigate the relationship between the composition of boards of directors of Brazilian public companies and the firm value. The analysis is conducted by reference to a group of 208 Brazilian companies listed on Bovespa in the year 2008. The contribution of the study is done to assess the level of adherence to the recommendations of the Brazilian Institute of Corporate Governance (IBGC) regarding the composition of the board and its relation to market value. Using a multiple regression, three variables were studied: the level of board independence (Indep), accumulation of function by the Chief Executive Officer (CeoPowerful) and board size (Nmembros). The variable Nmembros was statistically significant, indicating positive correlation between corporate value and board size.
Highlights
The purpose of this paper is to investigate the relationship between the composition of boards of directors of Brazilian public companies and the firm value
The board is a major mechanism of governance, whose main objective is to minimize agency problems which can arise through monitoring of executives (FAMA, JENSEN, 1983a, 1983b).This monitoring carried out by members of the board of directors is necessary to protect the interests of all shareholders (JENSEN, 1993)
Andrade et al (2009, p. 6) point out that “the board of directors is seen as an agency which has the responsibility to decide on behalf of the owners. ".Common sense suggests that a higher level of board independence allows for a more effective monitoring and improves the performance of organizations (COLES, DANIEL; NAVENN, 2008)
Summary
The purpose of this paper is to investigate the relationship between the composition of boards of directors of Brazilian public companies and the firm value. The contribution of the study is done to assess the level of adherence to the recommendations of the Brazilian Institute of Corporate Governance (IBGC) regarding the composition of the board and its relation to market value. 1. INTRODUCTION he recent losses recognized by some Brazilian companies - Sadia, Aracruz, Votorantim - in operations with derivative financial instruments put the controllers of companies in crisis and investors on a collision course. INTRODUCTION he recent losses recognized by some Brazilian companies - Sadia, Aracruz, Votorantim - in operations with derivative financial instruments put the controllers of companies in crisis and investors on a collision course These facts resume the discussion of agency conflicts - widely discussed by Jensen and Meckling (1976) - and of corporate governance mechanisms. Andrade et al (2009, p. 6) point out that “the board of directors is seen as an agency which has the responsibility to decide on behalf of the owners. ".Common sense suggests that a higher level of board independence allows for a more effective monitoring and improves the performance of organizations (COLES, DANIEL; NAVENN, 2008)
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