The Evolution of Corporate Governance in Brazil
Bernard S. Black
Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)
Antonio Gledson De Carvalho
Fundacao Getulio Vargas School of Business at Sao Paulo
Joelson Oliveira Sampaio
University of Sao Paulo (USP) - Department of Economics
April 3, 2014
Northwestern Law & Econ Research Paper No. 12-22
We use extensive hand collected surveys reporting governance practices 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 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.
Number of Pages in PDF File: 30
Date posted: November 30, 2012 ; Last revised: April 3, 2014
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