Corporate Governance In Brazil Research Articles

A decade of corporate governance in Brazil: 2010-2019

We take advantage of the Brazilian mandatory corporate governance (CG) reporting system to build an overall Brazil Corporate Governance Index (BCGI) and subindices (CGIs), and track changes in firms' scores over the 10-year period from 2010-2019. We show that overall CG level improved significantly between 2010 and 2019, with most of the improvement over the first part of this period. The improvement has two sources: an increase in the proportion of high-standard listings (Novo Mercado and Level 2, NML2) versus low-standard listings (Level 1 and regular, L1R), and within-firm improvement in CG practices. In the first half of the sample period, both NML2 and L1R firms improved CG practices considerably. Overall improvement in the second half of the sample period reflects an increasing proportion of NML2 firms, plus gradual improvement in L1R CG levels; with nearly constant NML2 levels. Improvements were stronger for Board Procedure and Disclosure subindices. Firms in both listings improved their CG. Overall improvement was stronger in NML2 than in L1R, but was concentrated in the period from 2010-2015.

Enhancing Corporate Governance: An Exploratory Study on Overcoming Challenges Faced by the Board of Directors in Implementing the Corporate Governance Code in Brazil

This study aims to identify the challenges encountered by boards of directors in effectively implementing the corporate governance code within organizations. Adopting a qualitative and exploratory approach, the research employed semi-structured interviews with a select group of eight professionals chosen based on their extensive experience as board members. The gathered data was thematically categorized and subjected to content analysis. The findings reveal the significant difficulties perceived by these professionals in achieving the code's effective application. Overcoming these barriers, which encompass contextual and dissemination factors, board practices, as well as the roles of directors, shareholders, and regulatory bodies in the market, has the potential to enhance the quality of corporate governance in Brazil.

Firms’ legitimation through corporate governance and its association with risk and return in Brazil

Purpose This study aims to examine the listing of firms at the highest corporate governance level of the Brazilian stock exchange (B3) as a means of legitimation and its relationship with risk and return on investment. Design/methodology/approach This paper analyzes 205 companies from 2010 to 2019, in which firms listed at the Novo Mercado level were compared with groups composed of other firms traded on B3. Findings The main results demonstrate that a listing at the supposedly higher level of corporate governance in Brazil does not indicate lower risk, a higher return or even a better risk-return ratio. Research limitations/implications The findings are restricted to this sample, representing the association identified between the analyzed phenomena and not a cause-effect relationship. Practical implications The highest level of corporate governance in Brazil brings together firms that present a higher risk (at least systematic) and lower returns (at least financial) because they seek to legitimize themselves in the market as firms committed to better management practices. Social implications These findings are useful to investors, the stock exchange, regulatory agents and the companies themselves to reflect on the purpose and usefulness of different levels of corporate governance in Brazil. Originality/value This study differs from the others that relate corporate governance to risk or return because it does not deal individually with corporate governance practices, but rather the phenomenon that is listed in a special governance level, created by the stock exchange, serving as a kind of seal legitimation.

A brief discussion on the history of the emergence of corporate governance in Brazil

This short essay aims to illustrate and discuss the history of the creation and emergence of corporate governance in Brazil. For this, the initial theoretical frameworks of governance are addressed, going through the Brazilian laws that address governance.

The ultimate controlling owner and corporate governance in Brazil

PurposeHigh ownership concentration makes controlling blockholders powerful enough to use private benefits of control and able to shape the corporate governance system to favor their own interests. This paper aims to examine the effect of the nature of the ultimate firm owner on the quality of corporate governance in Brazil.Design/methodology/approachEconometric models are estimated to assess whether the nature of the ultimate controlling shareholder affects the quality of the corporate governance system. Models are estimated using panel data methodology with coefficients estimated by the generalized method of moments system estimator.FindingsThe results show that the absence of a controlling shareholder has a positive effect on corporate governance, whereas the presence of a controlling blockholder, or a shareholder agreement among a few large shareholders, has a negative effect. This adverse effect holds when the controlling blockholder is a family or another firm. The findings are in line with the expropriation effect given that weaker corporate governance system facilitates controlling shareholders’ ability to extract private benefits of control. The findings also give support to the substitution effect as powerful blockholders take on the management monitoring function by weakening the board.Originality valueFollowing important previous literature, the study investigates the effect of the nature of large controlling shareholders on the adoption of good corporate governance practices. The work provides additional evidence on the effect of the nature of large controlling shareholders on the quality of the corporate governance system in Brazil, taking into account the main kinds of controlling blockholders present in that market. The findings give support to both the expropriation and substitution hypotheses highlighting the presence of the principal-principal agency model in an important emerging market, Brazil.

Escolhas contábeis na demonstração dos fluxos de caixa em companhias listadas no novo mercado da B3

Este estudo investigou quais fatores podem estar relacionados às escolhas contábeis na DFC realizadas em 112 companhias abertas não financeiras listadas no Novo Mercado da B3 no período de 2010 a 2015. A principal contribuição deste estudo é fornecer um panorama sobre a forma como as empresas consideradas com alto nível de governança corporativa no Brasil estão evidenciando seus fluxos de caixa no que tange à comparabilidade e, também, ao gerenciamento da DFC, fazendo escolhas que impliquem em um aumento do fluxo de caixa operacional. Este estudo oferece evidências de que a maioria das empresas apresenta a DFC pelo método indireto e segue as recomendações de políticas contábeis contidas no CPC 03 para classificar juros e dividendos pagos e recebidos. Além disso, o tamanho da empresa e as oportunidades de crescimento parecem ter relação com as escolhas de classificação de juros pagos e dividendos recebidos, respectivamente. Os resultados no contexto brasileiro diferem de achados anteriores em outros mercados, provavelmente por implicações do ambiente institucional em que as empresas se inserem.

The Ultimate Controlling Owner and Corporate Governance in Brazil

High ownership concentration makes controlling blockholders powerful enough to use private benefits of control and able to shape the corporate governance system to favor their own interests. This work aims to examine whether the nature of the ultimate firm owner affects the quality of corporate governance in Brazil. Econometric models are estimated to assess the effect of the nature of the ultimate controlling shareholder on the quality of the corporate governance system. Models are estimated using panel data methodology with coefficients estimated by the Generalized Method of Moments (GMM) system estimator. Results show that the absence of a controlling shareholder has a positive effect on corporate governance whereas the presence of a controlling blockholder, or a shareholder agreement among a few large shareholders, has a negative effect. This adverse effect holds when the controlling blockholder is a family, or another firm. The findings are in line with the expropriation effect given that weaker corporate governance system facilitates controlling shareholders ability to extract private benefits of control. The findings also give support to the substitution effect since powerful blockholders take on the management monitoring function by weakening the board. The work provides additional evidence on the effect of the nature of large controlling shareholders on the quality of the corporate governance system in Brazil, taking into account the main kinds of controlling blockholders present in that market. The findings give support to both the expropriation and substitution hypotheses highlighting the presence of the principal–principal agency model in an important emerging market, Brazil.

The influence of private equity in the governance of Brazilian companies

The private equity (PE) investors usually seek opportunities in the target companies in order to earn high returns. One opportunity explored by PEs is the potential that the company has to improve its governance and provide a better structure for the investor, which results in the generation of shareholder value and improve market value. For this, PE enhances the adoption of good corporate governance practices with the goal of creating value for their investment. This study explores how PE improves the governance of target companies in Brazil. The quality of corporate governance is measured by a firm-level corporate governance index, by cross-listing shares in the U.S., and by listing on New Market, a special governance segment in Brazil. We estimate different panel regression and probit models to analyse the relation between PE and governance. We also test different governance metric as dependent variables and use various firm characteristics as control variables. Our results show a positive influence of PE in improving corporate governance in Brazil.

Does better corporate governance increase operational performance?

PurposeThis study aims to examine the association between the adoption of corporate governance practices and operational performance in companies listed on the Brazilian Stock Exchange.Design/methodology/approachThe sample comprises the 80 largest companies in market value present in the Brazil Stocks Index in 2014. Principal component and cluster analyses techniques are used to evaluate performance and capital structure, and a regression model is applied to identify the relationship between key variables.FindingsThe findings show that the incidence of a high level of corporate governance in Brazil occurs among smaller companies with less desirable operational performance, rather than the biggest (blue chip) companies. Using a regression model with the return on assets as a dependent variable, a dummy variable for “governance”, and the size of the companies as a control variable, the authors find no association with good practices of corporate governance and operational performance for the companies in the sample.Practical implicationsNewer companies are more likely to exhibit a higher level of corporate governance because of the actions of foreign investors who demand the adoption of stronger corporate governance practices. Although there is demand from wealthy local institutional investors, many older traditional firms could still restructure to achieve higher levels of governance, especially in the case of emerging economies with less mature stock exchangesOriginality/valueThis study contributes to the recent debates in the literature by identifying evidence for an association between operational performance and corporate governance rather than a causal relationship.

O conhecimento em Governança Corporativa

<p>http://dx.doi.org/10.5007/2175-8069.2015v12n26p99</p><p>O entendimento da Governança Corporativa se destaca tanto nas estruturas organizacionais quanto na acadêmica. O melhor entendimento desse campo estabelece o objetivo deste estudo de identificar se o conhecimento em Governança Corporativa no Brasil está legitimado. Para atender às propostas deste estudo, realizou-se uma pesquisa descritiva, de abordagem quantitativa, utilizando a técnica do <em>data mining</em>. A análise dos dados possibilitou identificar que as obras dos autores Ricardo Pereira Câmara, Alexandre Di Miceli da Silveira, Rubens Famá e Richard Saito encontram-se legitimadas. Dos dez pesquisadores considerados como legitimados seis são internacionais. A pesquisa identificou 193 artigos elaborados por 359 autores, com uma distribuição próxima à da Lei de Lotka, que possibilita identificar um pequeno núcleo de autores com muitas publicações. Verificou-se que 55 revistas publicaram artigos voltados à Governança Corporativa e se posicionam como importantes instrumentos de legitimação desse campo científico no que tange ao conhecimento.</p><p><strong> </strong></p>

Firm age, value, performance and corporate governance in Brazil

Several articles analyze the life cycle of firms and identify throughout time that their performance has an inverted U shape. Firms achieve an optimal level and, thereafter, decline due to lack of flexibility and difficulties to keep up with market changes. The objective of this study is to investigate whether there is a relation between firm age, value and performance in Brazilian companies, and we verify if firm age has an affect on their governance practices. We analyze 250 Brazilian listed firms from 2002 to 2009. Our results indicate that the relation is not shaped as an inverted U in Brazil, and that older firms show higher value and better return on their investments. We also report that older firms show better governance practices.

Dual-class unifications and corporate governance in Brazil

We investigate dual-class unifications in a period following the successful inception of a premium single-class listing segment. Firms that unified increased their market liquidity. Investment opportunities and shareholder rights convergence drove unification of firms that later joined the new premium list. Financial constraints impelled unification firms that remained in the least demanding list. All unified firms that joined the new list remained there five years later. Half of the others delisted or were in serious financial distress. The motivations for unification may differ according to the ability of firms to improve their corporate governance and transparency later.

The evolution of corporate governance in Brazil

We use extensive hand collected surveys reporting governance practices of Brazilian firms in 2004, 2006, and 2009 to build a broad corporate governance index and analyze the evolution of corporate governance in Brazil and the association between governance and firm value. We find that corporate governance practices improved significantly over this period. This evolution is due to two main factors: 1) growth in Novo Mercado and Level II (NM&L2) listings, mainly through IPOs by new firms, and 2) improved practices at non-NM&L2 firms, principally through adopting governance elements required for NM&L2 listing. Governance practices for firms already listed on NM&L2 were stable. Adoption of the elements of our governance index that are required for NM&L2 listing predicts higher firm value. In contrast, adoption of the remaining elements of our index does not predict firm value. Thus, governance changes appear to respond to investor preferences.

Private equity and corporate governance in Brazil

This work studies how the activism of institutional investors, specifically private equity funds, influences the development of corporate governance in Brazil. We analyze the control and ownership structure of Brazilian publicly listed companies in order to identify the presence of private equity funds as shareholders. Corporate governance is evaluated through three alternative proxies: a broad governance index, listing on Novo Mercado and presence of American Depositary Receipts (ADRs). Our results indicate a positive influence of private equity funds on the quality of corporate governance practices in Brazil. Firms with private equity tend to have better governance index, and list more on Novo Mercado. There is a moderate relation between the stake of private equity in a company and ADR listing

The State, Unions, and Work Reorganization

The state and the unions are the main institutions of corporate governance in Brazil’s emerging economy. The human-resource management policies of firms rely on changes in labor law and labor market regulations rather than on managerial models. The legal measures taken by the past two administrations, including profit-related pay and the hour bank, all aim at flexibility and labor market deregulation. The current reforms of Brazilian labor law apparently fit, in a contradictory way, long-standing banners of the “new unionism” such as decentralized negotiations and anticorporatist procedures. Neoliberal policies have disrupted old labor allegiances, leaving the unions more vulnerable than ever. El estado y los sindicatos son las principales instituciones de gobierno corporativista en la emergente economía brasileña. Las políticas de administración de recursos humanos de las empresas depende más de cambios en la ley laboral y de la regulación del mercado de trabajo que de modelos de gestión empresarial. Las medidas legales tomadas por las dos últimas administraciones, incluyendo las políticas de salarios atados a las ganancias y el banco de horas, todos apuntan a la flexibilidad y desregulación del mercado de trabajo. Aparentemente las actuales reformas de la ley laboral brasileña caben, en forma contradictoria, en lemas establecidos del “nuevo sindicalismo” como son negociaciones descentralizadas y procedimientos anti-corporativos. Las antiguas lealtades laborales, ahora quebrantadas por la política neoliberal, deja a los sindicatos más vulnerables que nunca.

Corporate governance: A panoramic view of Brazilian boards of directors

In this study, we aim to provide a detailed overview of the characteristics of boards of directors (BoDs) in Brazil. We analyse 2023 resumes that we hand-collected from the board members of 315 public companies listed on the Sao Paulo Stock Exchange (Bovespa). On the basis of this analysis, we highlight approximately 30 characteristics of BoDs, such as evaluation mechanisms, meeting frequency, independence and special committees. We highlight the rare presence of women on these boards and the limited presence of independent directors, although we also note that the majority of directors are outsiders. In the Brazilian context, more than 40 per cent of companies listed on the Bovespa are included in the special listing segments for corporate governance; more than 75 per cent of directors are named by the controlling shareholder, which exacerbates conflicts between controlling and minority shareholders. This study indicates that many public companies do not follow the recommendations of the IBGC (the Brazilian Institute of Corporate Governance) regarding various aspects of corporate governance. Finally, this study has practical implications for regulators, academics, government authorities and practitioners seeking to develop better incentive schemes for corporate governance in Brazil.

Institutional Investors and Corporate Governance in Brazil

This is a PowerPoint presentation that debates the role of institutional investors as relevant shareholders on corporate governance in Brazil. The data provides correlational evidence that the presence of some institutional investors such as largest pension funds and the (Brazilian Development Bank) BNDES as relevant shareholders are in fact associated with worst corporate governance practices, whereas the presence of independent mutual funds as relevant shareholders is associated with better overall governance practices.Therefore, the role of institutional investors on corporate governance is not uniform in Brazil, depending on the characteristics and incentives of each class of institutional investor.

Transparency in executive compensation and corporate governance in Brazil

Studies regarding executive compensation are still recent in Brazil, and are predominantly focused on qualitative surveys. Usually the reason given to justify the lack of studies in this area is the absence of available data, or the level of quality and transparency when the data exist. This study analyzes the relationship between governance practices and transparency in disclosure of executive compensation data by Brazilian companies. One of the contributions of this study to existing literature is the creation of an original transparency index for executive compensation. Using the listing of ADRs in the U.S. and on the “Novo Mercado” of the Brazilian stock exchange (BM&FBovespa) as proxy variables for good governance practices, the results show that companies with ADRs tend to be more transparent regarding executive compensation. On the other hand, there is no significant relation between executive compensation transparency and listing on Novo Mercado. This conclusion makes sense, given that the U.S. law includes detailed guidelines for information on executive compensation, whereas the Novo Mercado does not contain specific rules regarding disclosure of executive compensation.

Corporate Governance and Capital Markets in Brazil: History and Current Overview

This is a PDF file with a presentation about the history and panorama of Corporate Governance and Capital Markets in Brazil, as of earlier 2014. It intends to help foreign researchers and practitioners to understand the evolution of the debates about corporate governance in Brazil, as well as its current state. The presentation is divided in five topics: 1. A big picture about Brazil, including a brief comparison against other BRICs; 2. Historical perspective and main corporate governance landmarks in Brazil; 3. The evolution of the Brazilian corporate governance model; 4. Current data on Brazilian capital markets, 5. Concluding remarks.

Corporate governance in Brazil

We examine the corporate governance practices of Brazilian public companies. We identify areas where their governance is relatively strong and weak. Many firms have small boards, comprised entirely or almost entirely of insiders or representatives of the controlling family or group. Even some very large firms have no independent directors. Formal board processes are limited. Audit committees are uncommon, but many firms use a substitute body—the fiscal board—which does not require that the firm have independent directors to staff the audit committee. Financial disclosure is mixed. Some firms voluntarily provide English language disclosure, but many do not provide cash flow statements or consolidated quarterly financial statements. Brazilian corporate law often provides limited protection to minority shareholders, but the Brazilian stock exchange, Bovespa, provides optional governance rules which go beyond the legal minimums. These optional rules have become increasingly popular with Brazilian firms.