The Dynamics of Corporate Governance: Evidence from Brazil

34 Pages Posted: 20 Sep 2023 Last revised: 7 Dec 2023

See all articles by Bernard S. Black

Bernard S. Black

Northwestern University - Pritzker School of Law

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo

Humberto Gallucci Netto

Fundacao Getulio Vargas School of Business at Sao Paulo

Date Written: September 19, 2023

Abstract

We study the evolution of corporate governance (CG) practices in Brazil over 2010-2019, using a country-specific Brazil Corporate Governance Index (BCGI) validated in prior work. We study separately firms in high-governance and low-governance legal regimes, in a single country. CG improved considerably in Brazil over 2010-2015, with much smaller changes over 2015-2019. Positive CG changes are much more common than negative changes. Some firms made only minimal changes, despite low initial CG levels. We also study which firm financial factors predict both CG levels and changes in levels. None of the firm financial variables we study consistently predicts CG levels. However, for CG changes, a measure of equity financing need predicts CG improvements in the first half of the sample period, but only for firms in the lower governance regime, not for firms in the higher regime. This is the first article to find evidence for firm financial characteristics predicting CG changes, consistent with theoretical predictions, including stronger effects for firms in the lower governance regime.

The Appendix for this paper is available at http://ssrn.com/abstract-4576314.

Keywords: Brazil, corporate governance, boards of directors, minority shareholders, disclosure

JEL Classification: G18, G30, G34, G39, K22, K29

Suggested Citation

Black, Bernard S. and De Carvalho, Antonio Gledson and Gallucci Netto, Humberto, The Dynamics of Corporate Governance: Evidence from Brazil (September 19, 2023). European Corporate Governance Institute – Finance Working Paper Forthcoming, Northwestern Law & Econ Research Paper No. 23-20, Available at SSRN: https://ssrn.com/abstract=4576308 or http://dx.doi.org/10.2139/ssrn.4576308

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo ( email )

R. Itapeva, 474 - 7o. andar
Sao Paulo 01313-902
Brazil
+5511 3281-7767 (Phone)

Humberto Gallucci Netto

Fundacao Getulio Vargas School of Business at Sao Paulo ( email )

R Itapeva, 474 11º. andar
São Paulo, São Paulo 01332-000
Brazil

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