Is the Quality of Corporate Governance Associated to the Market Risk for Brazilian Energy Companies?

International Journal of Intercultural Information Management, v. 2, n. 4, pp. 276-300, August 2011

21 Pages Posted: 8 May 2012

See all articles by Valdir Lameira

Valdir Lameira

INESC Coimbra

Jean E. Harris

Pennsylvania State University - School of Business Administration

Osvaldo Quelhas

affiliation not provided to SSRN

Roberto Pereira

Fluminense Federal University

Date Written: December 1, 2009

Abstract

This study estimated the quality of governance practiced by a significant sample of Brazilian publicly traded companies and a sub sample of Brazilian energy companies, between 2002 and 2006, and related it to market risk. An index composed of twenty questions, with all answers in binary form, was constructed to measure the quality of governance. Market risk was measured by the volatility of the share prices, cost of capital, Beta and idiosyncratic risk. The results obtained through the application of the method of simple and multiple linear regressions, were confirmed, with robustness, by the results obtained by the use of structural equations, confirming the original hypotheses. The effects of possible endogeneity do not harm the results obtained using the linear regressions. It seems that governance is relevant for the sample and sub sample of energy companies, though we didn't observe significant statistical results for the sub sample of energy companies.

Keywords: Governance, risk, Brazilian public companies, energy companies, capital market, volatility, cost of capital, idiosyncratic risk, Beta, linear regressions and structural equations

JEL Classification: G30, C30, C33

Suggested Citation

Lameira, Valdir and Harris, Jean E. and Quelhas, Osvaldo and Pereira, Roberto, Is the Quality of Corporate Governance Associated to the Market Risk for Brazilian Energy Companies? (December 1, 2009). International Journal of Intercultural Information Management, v. 2, n. 4, pp. 276-300, August 2011. Available at SSRN: https://ssrn.com/abstract=2054657

Valdir Lameira (Contact Author)

INESC Coimbra ( email )

Rua Antero de Quental, 199, Coimbra
Coimbra, Coimbra 3000-033
Portugal

Jean E. Harris

Pennsylvania State University - School of Business Administration ( email )

777 West Harrisburg Pike
Middletown, PA 17057-4898
United States
717-948-6157 (Phone)
717-948-6456 (Fax)

Osvaldo Quelhas

affiliation not provided to SSRN ( email )

Roberto Pereira

Fluminense Federal University ( email )

Rua Miguel de Frias, 9
Icaraí
Niterói, 24220-900
Brazil

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