Abstract
The degree of ownership concentration may influence executive and board compensation (Bebchuk & Fried, 2003). This article analyzes this relationship. Detailed information about top management and board compensation became available starting in 2010 through new Securities Commission filings. Linear regression models applied to a sample of 315 Brazilian companies traded on the national exchange indicate a negative and statistically significant economic correlation between executive compensation and the degree of ownership concentration. Ceteris paribus, companies with a lower degree of ownership concentration pay higher compensation to top executives. Family controlled companies pay more to their chief executive, but not to the managerial team as a whole, and the compensation of directors increases with a greater proportion of control group members or their relatives on the board. There was support for the Managerial Power Hypothesis in companies with a lower degree of ownership concentration and for the extraction of private benefits in companies where it is greater.
Highlights
The Brazilian capital market has experienced extraordinary growth in the past decade
The market value of listed companies in Brazil increased almost sevenfold during the same period, from US dollars (US$)185.65 billion in 2001 to US$1.2 trillion at the end of 2012, according to data obtained from the Brazilian Securities Commission (CVM, Comissão de Valores Mobiliários, 2010a) and the Central Bank of Brazil (2013)
It demanded that companies disclose and regularly update the Formulários de Referência (FR) regarding their ownership structure, identifying who are their controlling shareholders, as well as those that hold 5% or more of any stock class, down to the level of an individual, the state, or organizations whose owners must remain anonymous by law, such as the ultimate beneficiaries of some institutional investors or the shareholders of companies headquartered in certain countries
Summary
The Brazilian capital market has experienced extraordinary growth in the past decade. The total amount raised in public offerings of corporate debt and equity securities was US$12.9 billion in 2001 These offers amassed a record of US$98.3 billion by the end of 2007, just before the spreading of the global financial crisis. This included US$42.7 billion in public equity offers, which declined to US$7.0 billion by the end of 2012. The market value of listed companies in Brazil increased almost sevenfold during the same period, from US$185.65 billion in 2001 to US$1.2 trillion at the end of 2012, according to data obtained from the Brazilian Securities Commission (CVM, Comissão de Valores Mobiliários, 2010a) and the Central Bank of Brazil (2013)
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