Sensitivity of Value of Shares to Changes in Risk of Bankruptcy: A Study of Changes in Evaluation Criteria Occasioned by Law 11.638/07

REUNA, Belo Horizonte, V.16, N. 3, p. 61-74, Jul.-Set. 2011, ISSN 2179-8834

14 Pages Posted: 5 Sep 2012

See all articles by Vinícius Martins

Vinícius Martins

affiliation not provided to SSRN

Mamadou Dieng

affiliation not provided to SSRN

Luiz Felipe de Araújo Pontes Girão

Federal University of Paraiba (UFPB)

Edilson Paulo

Federal University of Paraiba (UFPB)

Aldo Leonardo Cunha Callado

affiliation not provided to SSRN

Lílian Perobon Mazer

affiliation not provided to SSRN

Date Written: September 30, 2011

Abstract

The Law 11.638/07 paved the way for Brazil to begin the process of convergence to IFRS. This change led to some changes in the ownership structure of the entities obliged to disclose your information under this Act. Knowing these changes in the ownership structure of entities, this study aimed to analyze the sensitivity of the value of the shares to the likely variations in the risk of discontinuity caused by changes in evaluation criteria from the Law 11.638/07. For this, we defined a sample that consisted of the companies in the energy sector, according to the classification given by the magazine Exames Maiores e Melhores (2009), and which were also quoted on the BM & F Bovespa. The variable "risk of discontinuity" was represented by the factor of insolvency of Kanitz (1978). The aim was to investigate the variation in risk (factor of insolvency) with data for the same exercise (2007), but which were measured with two bases: Act 6404/76and 6404/76 amended by 11638/07 and then to analyze how changes the risk of discontinuity explain the variations in stock prices from 2007 to 2008. To verify if the variations in the risk of discontinuity were significant, we used the nonparametric test of Wilcoxon and to analyze the sensibility of changes in stock price to changes in this risk the estimation of a cubic regression model was made. The results showed evidence that the changes in the risk of discontinuity, caused by changes in assessment criteria, had an insignificant degree of relationship due to changes in stock prices.

Note: Downloadable document is in Portuguese.

Keywords: Evaluation Criteria, Corporate Law, Risk of Discontinuity, IFRS

Suggested Citation

Martins, Vinícius and Dieng, Mamadou and Pontes Girão, Luiz Felipe de Araújo and Paulo, Edilson and Callado, Aldo Leonardo Cunha and Mazer, Lílian Perobon, Sensitivity of Value of Shares to Changes in Risk of Bankruptcy: A Study of Changes in Evaluation Criteria Occasioned by Law 11.638/07 (September 30, 2011). REUNA, Belo Horizonte, V.16, N. 3, p. 61-74, Jul.-Set. 2011, ISSN 2179-8834. Available at SSRN: https://ssrn.com/abstract=2141258

Vinícius Martins (Contact Author)

affiliation not provided to SSRN ( email )

Mamadou Dieng

affiliation not provided to SSRN ( email )

Luiz Felipe de Araújo Pontes Girão

Federal University of Paraiba (UFPB) ( email )

Cidade Universitária
s/n - Castelo Branco III
João Pessoa, Paraiba 58297-000
Brazil

Edilson Paulo

Federal University of Paraiba (UFPB) ( email )

Cidade Universitária
s/n - Castelo Branco III
João Pessoa, Paraiba 58297-000
Brazil

Aldo Leonardo Cunha Callado

affiliation not provided to SSRN ( email )

Lílian Perobon Mazer

affiliation not provided to SSRN ( email )

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