Brazilian Stock Exchange Research Articles

The Effect of Corporate Diversification on Tax Aggressiveness in Brazilian Companies

Objective: To verify whether firms that operate in several different business sectors are more tax aggressive in comparison to firms that operate in a single or a few segments. Method: The study analyzes a sample of firms listed in the Brazilian stock exchange B3 in the period from 2010 to 2017. To verify the existence of a relationship between diversification and tax aggressiveness, a data panel regression model with fixed effect of company and year was used and additionally the logit model. To measure tax aggressiveness, it was used ETR (effective rate of taxation) and ETR long (long-run effective tax rates). Originality/relevance: This type of research is unprecedented in Brazil, being a point not yet explored in the literature, in view of its peculiarities of a developing country. Relevant to define the effect of diversification on tax aggressiveness. Results: It was observed that the more companies are diversified, the lower the probability of having low tax aggressiveness, or that more diversified companies are more likely to be more aggressive, compared to companies with only one segment. Therefore, the results indicate that among companies with segments, the more segments, the more aggressive the company. Theoretical/Methodological contributions: A better understanding of the phenomenon of tax aggressiveness, causes and determinants, having implications for financial statement users, in particular tax regulators.

Analysis of contents of annual sustainability reports of industrial companies participating in the sustainability index of the Brazilian Stock Exchange

The objective of this article is to analyze the content of environmental disclosure of industrial companies participating in the Corporate Sustainability Index (ISE) of the Brazilian Stock Exchange (B3) from 2009 to 2016, based on the Stakeholders’ Theory perspective. We adopt a descriptive approach, with qualitative and quantitative analysis of secondary data that we analyze by means of content analysis and statistical techniques. The data collection took place from the institutional site of each organization to obtain the Annual Sustainability Reports. The reports went through text analysis, which resulted in an inventory of words related to the concept of sustainability. The results indicate that the analyzed companies have similarities with regard to the content disclosed in the Annual Sustainability Reports. Such similarities occur in spite of the fact that companies operate in different industrial segments (petrochemical, food, wood, pulp and paper products and personal use products) and probably come from a homogeneous perception of the segments interested in the information, which would be in reduced number. Although the surveyed companies operate in different segments, they are subject to similar pressures by stakeholders and that imposes an apparent homogeneity to their reports.

Forecast model for financial time series: An approach based on harmonic oscillators

A financial asset price-forecasting model based on damped driven harmonic oscillator is presented. It is inspired on the idea that in the price fluctuations a restoring force to a supposed fair price, besides inertia and dissipation, could take place. The model is evaluated in an emerging market, which is of the Brazilian stock exchange BM&FBovespa (B3). The choice is due to the expectation that the model could perform better by exploiting deviations from the concept of efficient market. In such direction, the use of Hurst exponent to choose suitable assets to trade employing the model is discussed. A fairly common trading system endowed with the stop gain and stop loss limiting parameters was used to evaluate the model. To avoid excessive arbitrariness, those parameters were established after a study referred to the data itself in which a consistently defined relation return/risk is computed. The proposed model overcomes a full random model in four studied cases. In the aggregated result of 5 stocks, it was achieved a return of investment of 64:80%, disregarding operating costs. This is 72.19% higher than the respective result from random model.

A Diversidade de Gênero Pode Afetar a Liquidez e o Risco de Companhias?

The gender diversity in boardrooms and high management positions of firms is a subject that has been gaining visibility, since it started to be seen as a corporate governance practice, regarding the participation in monitoring committees and the better disclosure of information. Thus, this paper sought to verify how gender diversity, through the participation of female directors and executives, impacts on the accounting liquidity and risk of companies listed in the Brazilian stock exchange. An analysis of unbalanced panel data was performed using the Generalized Method of Moments, considering 234 companies in the period from 2010 to 2016. Results showed that the number of women in those positions still small, and that the proportion of female directors is negatively linked to liquidity and positively linked to risk, contrary to much of the literature. For the proportion of female executives, the relation to liquidity was significant and positive. It can be inferred that female directors act as a corporate governance mechanism, being more confident and encouraging the risk-taking in order to meet the interests of shareholders, while female executives tend to be less confident, protecting their positions.

The impact from adapting of the IFRS 9 (CPC 48) on expected credit losses (ECL) in Brazilian energy companies

Purpose: To identify the IFRS 9 (CPC 48) adoption impact on Expected Credit Losses, based on historical losses under CPC 38.
 Methodology: a documentary, exploratory research was carried out in all the companies of the electric energy sector listed on the Brazilian Stock Exchange, denominated, Brazil, Bolsa, Balcão (B3) of the Novo Mercado (NM), Level 1 (N1) and Level 2 (N2) of corporate governance. Analyzing all the expected losses disclosed in the financial statements, mainly the explanatory notes of 2017 and the first quarter of 2018. For the companies that disclosed these adjustments the Wilcoxon average comparison tests and the Boxplot diagram were performed.
 Results: The survey results showed that not all the companies analyzed disclosed the adjustments and the accounting criteria of the SCPPs in the Explanatory Notes, according to CPC 48, and those that disclosed haven´t had a significant impact on the adoption of the new CPC.
 Contributions of the Study: This paper contributed to the reflection, understanding and analysis of the adoption, impact and empirical evaluation of the effects of the expected loss models on companies in the electricity sector, corroborating the effects of the Standard CPC 48 (IRFS 9) on the financial statements of companies classified as New Market, starting in January 2018, and may be useful in the process of regulating the segment, in decision-making and possible understanding of its potential effects, particularly in the adequacy of multinational standards. It was verified whether changes in expected losses measurement metrics could result in impacts on net income for the year, as well as changes in the net value of current assets, both of which are relevant to decision making. Such verification is relevant to the managers of the companies and investors, for security in relation to the maintenance of the form of performance verification.

A Framework to Perform Asset Allocation Based on Partitional Clustering

Over the past years, many approaches to perform asset allocation have been proposed in the literature. Most of them tackle this problem as an optimization task, where the goal is to maximize return, whilst minimizing the risk. However, such approaches require the inversion of a positive-definite covariance matrix, usually resulting in the concentration of allocation, instability and low performance. Some methods have been recently introduced to solve this problem by facing it as a clustering problem. This paper introduces a framework for asset allocation based on partitional clustering algorithms. The idea is to segment the assets into clusters of correlated assets, allocate resources for each cluster and then within each cluster. The framework allows the use of different partitional clustering algorithms, intragroup and intergroup allocation methods. Also, various assessment criteria are considered, and a specialized initialization method is proposed for the clustering algorithm. The framework is evaluated with the Brazilian Stock Exchange (B3) data from the period 12/2005 to 04/2020. Different initialization methods are used for the clustering algorithm together with two intergroup and two intragroup techniques, resulting in five experimental scenarios. The results are compared with the Ibovespa index, the mean-variance model of Markowitz, and the risk-parity model recently proposed by Lopez de Prado.

BEHAVIORAL FINANCE: EMPIRICAL EVIDENCE USING MAGIC FORMULA IN THE BRAZILIAN STOCK MARKET

ABSTRACT Purpose: Explain the causes of inefficiencies in asset pricing on the Brazilian stock exchange through the behavioral finance hypothesis. Originality/value: Research made in the stock market over the last decades suggests that there is evidence of obtaining returns above the market average, through the purchase of undervalued assets, that is, when it has a low relation between the price and the fundamentals of the company. However, there is a notable discrepancy regarding the interpretation of causes among academics. The efficient markets hypothesis was presented, which is based on the premise of the strict rationality of economic agents. On the other hand, the behavioral finance theory was also discussed, which presents different assumptions. Design/methodology/approach: Using the historical quotes of the shares traded on B3, extracted from economática(r)'s database, the present work used the Magic Formula methodology to investigate the behavioral effect through the inefficiencies found in the pricing of these assets. Findings: The results suggest that the Brazilian stock market, in conformity with works of the same nature performed in markets in other countries, has inefficiencies in the pricing of assets, so that it is possible to obtain advantages from economic agents. The interpretation for the causes of such inefficiencies is based on the premises of behavioral finance, and points to the existence of a limitation in the rationalization of these agents.

The Effect of National Business Systems on Social and Environmental Disclosure: A Comparison between Brazil and Canada

Purpose – This paper evaluates the influence of the institutional environment on the extent of social and environmental disclosure of companies from institutionally distant countries. Design/methodology/approach – We analyze basic materials, oil and gas , and public utility companies with shares traded on the Brazilian stock exchange (BM&FBovespa) and Canadian stock exchange (Toronto Stock Exchange) from 2007 to 2015. Quantitative methods are adopted through descriptive statistics and panel data analysis. The econometric modeling considers environmental and social disclosure as dependent variables , independent variables that represent the political, financial, educational and labor systems, and firm size, ROA , and indebtedness as control variables . Findings – In the case of the companies operating in Brazil, the extent of environmental and social disclosure is positively related to the political and labor systems, and negatively related to the financial system. In Canada, disclosure is negatively influenced by the financial system and the education system. The c ontrol variables, which represent characteristics of financial performance, were not significant. Originality/value – The study shows that isomorphic forces operate in the institutional field and affect the adoption of socially responsible behavior. By basing the study on institutionally distinct countries, such as Brazil and Canada, it reinforces the influence of the national business system on the extent of disclosure of environmental and social practices.

Impacts of Covid-19 Pandemic and Persistence of Volatility in the Returns of the Brazilian Stock Exchange: An Application of the Markov Regime Switching GARCH (MRS-GARCH) Model

This article provides a quantitative analysis using the Markov Regime Switching GARCH (MRS-GARCH) model with Gaussian distribution, in order to highlight the dynamics presented by Ibovespa during the period from September 2005 to September 2020, in which the subprime crisis occurred and the COVID-19 crisis started. In particular, it used two regimes (regime 1- low volatility and regime 2-high volatility) in the model so that the market parameters (Ibovespa) behave differently during economic crises with the regimes representative. The Ibovespa remained on regime 1 (low volatility) for three periods, totaling 176 months. In regime 2 (high volatility - 2008 and 2020 crises), it remained for about 5 months, that is, 3 months in the 2008 crisis and 2 months in the COVID-19 crisis. In addition, regime 1 is more persistent, that is, the probability of staying on this regime at a later period is approximately 98.27%, and that of switching to regime 2 is 48.25%. In regime 2, the probability of continuing this regime in the period t + 1 is 51.75%, while the probability of changing to regime 1 is 1.73.

MERCADO DE CAPITAIS NOS CENÁRIOS DE CRISE EM MERCADOS EMERGENTES

Esta pesquisa tem por objetivo revelar o comportamento e as relações da variação do valor de mercado em relação aos indicadores econômico-financeiros em cenários de crise de mercados emergentes. A análise empregou 224 empresas listadas na bolsa de valores brasileira, entre 2010 e 2017. Os resultados revelaram relação significativa em todos os momentos do valor de mercado e o nível de alavancagem financeira. Somente nos cenários de crise que a relação com a liquidez e a composição do endividamento foi consistente; na crise, os resultados revelaram uma série contínua de redução no valor de mercado.

Relato integrado e desempenho financeiro das empresas listadas na B3

O Relato Integrado tem como proposta a criação de valor para todos os seus stakeholders, organizado em seis capitais: financeiro, manufaturado, natural, intelectual, humano, social e de relacionamento. Esta pesquisa analisou se as empresas listadas na Brasil, Bolsa, Balcão (B3), pertencentes aos setores de bens industriais, materiais básicos, consumo não cíclico e utilidade pública, têm seu desempenho financeiro influenciado pela publicação do Relato Integrado. Por meio da análise de Dados em Painel, com estimação pelos Efeitos Fixos e Efeitos Aleatórios, apurou-se que não há influência da RSC sobre o desempenho financeiro nas empresas que publicam o documento em estudo; esse resultado foi apurado tanto na análise conjunta das empresas quanto na análise por setor de atividade.

Effect of Tax Aggressiveness on CEO Turnover

This study verifies the influence of corporate tax aggressiveness on the replacement of the Chief Executive Officer - CEO. Tax Aggressiveness can be a determinant of CEO turnover in companies listed on the Brazilian stock exchange B3. Methodologically, the study uses three metrics of tax aggressiveness to verify the nature of this relationship in the period from 2010 to 2016, ranking the results by quintile and identifying the high and low extremes of tax aggressiveness. In addition, control variables were used to reduce the bias of the proposed regression. The results evidence that less tax aggressive CEOs are more likely to be replaced. For managers, the findings reinforce that tax planning is a determinant factor to remain in the position.

Does extreme rainfall lead to heavy losses in the food industry?

PropósitoO gerenciamento de riscos associados à produção mundial de alimentos é um desafio importante para governantes. Diversos fatores, entre eles os eventos climáticos extremos, têm ameaçado a produção de alimentos nos últimos anos. Neste artigo nós analisamos o impacto de eventos de chuvas extremas na indústria de alimentos no Brasil, um dos maiores produtores mundiais.Diseño/metodología/enfoqueEmpregamos a metodologia híbrida AR-GARCH-GPD para verificar se chuvas extremas afetam o preço das ações das empresas de alimentos. Para isso, coletamos os preços de fechamento diário de 16 empresas do setor de alimentos listadas na Bolsa de Valores do Brasil [B]3, em janeiro de 2015.ResultadosOs resultados sugerem que esses eventos exercem impacto significante sobre o retorno das ações: em mais da metade dos dias imediatamente posteriores à chuva extrema ocorrida entre 28/02/2005 e 30/12/2014, os retornos foram significantemente baixos, levando a perdas médias diárias próximas de 1,97%. Esses resultados apontam para a relevância da necessidade de instrumentos para proteção contra riscos climáticos, particularmente na indústria de alimentos.Originalidad/valorTendo em vista que eventos climáticos extremos têm ocorrido com uma frequência cada vez maior, a literatura de finanças tem documentado tentativas de avaliar os impactos econômicos das mudanças climáticas. No entanto, nota-se a carência de pesquisas para avaliar os impactos desses eventos no nível das empresas.

Political risk, fear, and herding on the Brazilian stock exchange

ABSTRACTThis study analyses beta herding in the Brazilian stock market using a state–space model, controlled by two company groupings: those listed on the market index and those listed on the stock exchange as a whole. The findings revealed high herding in the Brazilian stock exchange, with only small differences between the groupings. Concerning the control variables, we verified that dividend yield, market volatility, SMB and WML factors were significant for both groups, indicating that herding is significant irrespective of those variables behavior

AN ECONOMETRIC PANEL-MIDAS MODEL OF ASSET RETURNS IN THE BRAZILIAN STOCK MARKET

We present the specification, estimation and testing of an econometric model intended to explain and forecast individual returns of securities listed on the Brazilian stock market. The model's explanatory variables include macroeconomic, fundamental and behavioural variables sampled at different frequencies. The model uses the MIDAS regression methodology, which supports estimation of regressions with variables sampled at different frequencies. The sample includes non-financial institutions listed in the Brazilian stock exchange from 2010 to 2016. The results indicate that the model is robust in explaining and forecasting quarterly returns of individual shares listed on that market.

Características dos Executivos do Alto Escalão e a Influência no Desempenho: Um Estudo em Empresas Listadas na Bolsa Brasileira

The aim of this research is to verify the influence of the demographic characteristics of the upper echelons on the economic performance of companies in the non-cyclical sector of Brazilian Stock Exchange – Brazil, Bolsa, Balcao (B3). Demographic characteristics - gender, duality, familiarity, academic degree (I and II) and age - were collected in the Reference Form, from 2010 to 2016. Regarding the economic performance, the Return on Asset (ROA) was collected. The data were analyzed through descriptive statistics and multiple regression with panel data by the estimated fixed effects model. The descriptive results, of the 966 observations, show that the number of female directors is low, as well as young directors. Both accounted for less than 10% of total observations. The results also show a positive relationship between gender and academic degree with performance organizational, while age and familiarity showed an negative relationship. It was concluded that the findings of the study raise questions about the organizational environments of Brazilian companies, the characteristics of the upper echelons and the capital structure of organizations.

The impact of the board of directors on business climate change management: case of Brazilian companies

The corporate sector is one of the main emitters in the world due to the production process and therefore is identified as a major contributor to climate change. In fact, the productive sector is both one of the major aggregators of the impacts of global climate change and a market actor who can play an important role in reducing, mitigating, and adapting the vulnerability of human and natural systems. The main objective of this study was to verify whether the climate change performance of Brazilian companies is influenced by the characteristics of the composition of the board of directors (BD). The performance here is measured according to company’s Carbon Disclosure Project (CDP) score. The score, besides evaluating the quality and comprehensiveness of information provided on climate change mitigation strategies, evaluates the level of concrete and proactive actions, policies, and strategies adopted by companies to mitigate climate change. The study was based on the premise that climate risk management is the responsibility of the board, which is responsible for ratifying important decisions in the company. A multiple linear regression model based on data from the CDP of a sample size equivalent to 72 Brazilian companies, referring to the period among 2014 to 2018, totaling 360 observations listed on the Brazilian stock exchange showed that corporate climate management have significant and positive relationship with the size of the company’s BD, number of independent directors of the BD, Business Sustainability Index (ISE) participation, size of firm, profitability, and industry classification. The findings suggest several strategies that could be used to engage firm in climate management, among which the increase in the number of independent directors in the board composition. In other words, we have found that one of the most effective strategies of mitigation and adaptation that can inhibit or pressure companies to become involved in climate management is increasing the number of independent directors on the board of directors. This result, although based on Brazilian companies, can have implications for the rest of the world’s companies, since, regardless of country, the BD’s role remains the same, ratifying the important decisions in the organization. Therefore, proportion of the number of independent director’s increase leads to the improvement of the company’s involvement in climate issues. Thus, potential investors, for example, may require such a feature before investing in a particular company. In addition, we found that companies that strive to be part of the ISE developed by the Sao Paulo capital market have a higher climate performance compared to companies that are not part of it, demonstrating therefore that ISE is a key instrument to get companies to increase their concern about environmental issues, in general, and climate, in particular. Thus, as global recommendations for mitigation/adaptation strategies, capital markets around the world can also play an important role in the climate mitigation and adaptation process by creating ISE-like instruments and creating incentives for companies to strive to adhere to these instruments.

Board structure and financial distress in Brazilian firms

PurposeThe purpose of this paper is to investigate what board characteristics affect companies in periods of financial distress (FD) among non-financial Brazilian firms and examine which model best fits to predict FD.Design/methodology/approachThe sample comprises data from 2010 to 2016 of the non-financial Brazilian firms listed on the Brazilian Stock Exchange. To measure this relationship, a conditional logistic regression is performed.FindingsA U-shaped relationship between the size of the board of directors (BD) and FD is found in all models, indicating an optimal number of six members in the BD during the period of FD. However, board characteristics (related to composition and directors’ independence) are insufficient to align the shareholders’ interests and unsuitable for avoiding or even reducing FD in firms when other factors are neglected. Furthermore, the results reveal what variables provide the best-fitting models to predict FD.Originality/valueTo the best of the authors’ knowledge, this is the first study that investigates how the composition of the BD affects the FD likelihood in the Brazilian context. The findings are potentially of interest to researchers and practitioners since this paper contributes to the growing literature on the influence of corporate governance mechanisms in periods of FD and the understanding of its prediction models.

Finanças comportamentais: análise dos fatores do efeito manada em empresas listadas na [B

Este trabalho baseou-se na Teoria do Prospecto (Kahneman & Tversky, 1979), sob a ótica da heurística do efeito manada, e teve como objetivo geral investigar a relação entre a crise do subprime, a publicação de notícias e o tamanho da empresa com comportamento manada nas 100 companhias com os maiores volumes de negociações listadas na [B]3 – Brasil Bolsa Balcão, no período de 2007 a 2016. A fim de alcançá-lo, foi utilizado inicialmente como metodologia o modelo de cross-sectional absolute deviation of returns (CSAD), proposto por Chang, Cheng e Khorana (2004), para a identificação da presença do efeito manada. As relações entre as variáveis foram analisadas por meio da regressão do modelo de dados em painel com efeitos fixos e erros-padrão robustos. De maneira geral, os resultados encontrados indicaram a existência de relação positiva entre o comportamento manada, a crise do subprime e a publicação de notícias boas; entretanto, revelou uma relação negativa com o tamanho da empresa. Para a variável Notícias Ruins os resultados não evidenciaram significância estatística (p-valor > 0,26), por isso a hipótese de existência de relação negativa entre o efeito manada e a publicação de notícias ruins foi rejeitada. Diante disso, entende-se que os investidores são influenciados pelas notícias positivas referentes às empresas, e isto tende a gerar neles um comportamento de investimento semelhante ao apresentado pelos grupos maiores de investidores, ou seja, o efeito manada.

Relatório de sustentabilidade e desempenho das firmas brasileiras de capital aberto

O objetivo deste trabalho foi analisar a associação entre a publicação do relatório de sustentabilidade e o desempenho das empresas abertas brasileiras. Foram coletados dados sobre a publicação do relatório de sustentabilidade das empresas abertas brasileiras listadas na bolsa de valores do Brasil (B3), bem como para variáveis relativas às características das firmas, a saber: desempenho, tamanho e alavancagem. A amostra do estudo contou com todas as empresas abertas brasileiras listadas na B3, exceto as financeiras, por suas especificidades contábeis, com dados disponíveis no período de 2012 a 2016, as quais totalizaram 1.889 observações. Dentre os resultados, observou-se que as empresas que publicam relatório de sustentabilidade possuem médias superiores para as medidas de desempenho, tamanho e alavancagem em relação às firmas que não publicam tal documento. Além disso, os coeficientes de correlação para as variáveis estudadas, dentre outros aspectos, indicaram uma associação positiva e estatisticamente significativa entre a publicação do relatório de sustentabilidade e o desempenho, tamanho da firma e alavancagem financeira.