Enterprise value and disclosure level: Evidences in the Brazilian market

Abstract

There is a strong tendency in global markets towards an enhanced level of corporate transparency regarding the activities of companies and, as a result, information on their performance. The Purpose of this study is to analyze the relationship between greater disclosure levels and shareholder value creation. Increasing levels of disclosure are required from companies‟ management before shareholders and the society in general. Obscure practices that fail to take into consideration the best interests of shareholders increase risks and cause shares to lose liquidity. The São Paulo Stock Exchange‟s “Novo Mercado” (“New Market”) emerged from the intent to improve the Brazilian stock market by adopting best practices in corporate governance, adding transparency to disclosed information, and heightening the respect for the interests of shareholders, whether they may be minority or not. The “Novo Mercado” intends to foster a differentiated environment in which companies committed to corporate governance are recognized and can benefit from better stock prices, resulting in lower placement costs and increased liquidity. Our research will assume that companies with American Depositary Receipts - ADRs are committed to a higher level of disclosure as a result of the requirements of the Security Exchange Commission – SEC, and the Financial Accounting Standards Board - FASB; an empiric study about these firms will be performed. We will determine, through a Study Event concerned with cases where ADR have been issued, which consequences of the commitment to higher levels of disclosure as regards shareholder are responsible for value creation, and what are the reflections on the stock price quoted in the Brazilian market.