Facing the Regulators: Non-Compliance with Detailed Mandatory Compensation Disclosure in Brazil
44 Pages Posted: 13 Oct 2014 Last revised: 15 Oct 2014
Date Written: October 14, 2014
A preliminary court injunction based on alleged personal security risks to managers and directors gave Brazilian public companies the option of non-compliance with the most sensitive part of newly mandated compensation disclosure rules. We find, however, no association between state-level crime data and non-compliance, which is possibly motivated by agency conflicts. Non-compliers tend to present lower corporate governance (CG) quality, higher ownership concentration, larger total assets, and less profitability. State and foreign owned companies are significantly less likely non-compliers. Shareholders correctly anticipated that lower CG quality firms were more likely to exercise their non-compliance option, but may have been negatively surprised when some higher CG quality firms did not comply.
Keywords: Compensation Disclosure, Compliance, Corporate Governance, Ownership Structure, Brazil
JEL Classification: G32, G34
Suggested Citation: Suggested Citation