Corporate Governance, Valuation and Performance: Evidence from a Voluntary Market Reform in Brazil

Financial Management, 2011, Vol. 40, No. 1, pp. 139-157

Pace University Finance Research Paper No. 2011/05

36 Pages Posted: 4 May 2011 Last revised: 27 Aug 2019

See all articles by Marcus V. Braga-Alves

Marcus V. Braga-Alves

Pace University - Lubin School of Business

Kuldeep Shastri

University of Pittsburgh - Finance Group

Date Written: April 1, 2011

Abstract

In December 2000, the Sao Paulo Stock Exchange launched a new premium market segment for companies that voluntarily commit to "good practices of corporate governance." We construct a composite index (NM6) that combines six proxies for the main governance practices targeted by Bovespa’s reform. We find that higher scores for our index are related to greater market value but not to better operating performance. An investment strategy that purchased stocks of firms with high NM6 and sold stocks of firms with low NM6 would have earned abnormal returns of 10.68% per year from 2001 to 2005.

Keywords: Corporate governance, firm valuation, operating performance, emerging markets, Brazil

JEL Classification: G34

Suggested Citation

Braga-Alves, Marcus V. and Shastri, Kuldeep, Corporate Governance, Valuation and Performance: Evidence from a Voluntary Market Reform in Brazil (April 1, 2011). Financial Management, 2011, Vol. 40, No. 1, pp. 139-157, Pace University Finance Research Paper No. 2011/05, Available at SSRN: https://ssrn.com/abstract=1830782

Marcus V. Braga-Alves (Contact Author)

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States

Kuldeep Shastri

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~ks112354

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