Corporate Governance Quality and Firm Value in Brazil

33 Pages Posted: 10 Aug 2006

Date Written: June 2007


This paper investigates the influence of corporate governance quality on market value of 154 Brazilian listed companies in 2002. In order to obtain a proxy for corporate governance quality, a broad governance index was built. The investigation was carried out by different econometric approaches in increasing order of complexity, including multiple regressions by Ordinary Least Squares (OLS), instrumental variables approach and systems of simultaneous equations. The results obtained in all econometric approaches show a positive and significant influence of corporate governance quality on firm's market value. OLS results with market value variables Tobin's Q and PBV multiple suggest that, ceteris paribus, a worst-to-best change in governance quality would result in a market capitalization increase of around 85% and 100%, respectively. The paper also finds evidence of corporate governance variable endogeneity and proposes different instruments for estimation by instrumental variables approach. Moreover, results by simultaneous equation approach indicate a relation of reverse causality between corporate governance quality and firm valuation.

Keywords: Corporate Governance, Governance Index, Corporate Attributes, Firm Value

JEL Classification: G32, G34

Suggested Citation

Di Miceli da Silveira, Alexandre and Barros, Lucas Ayres Barreira de Campos, Corporate Governance Quality and Firm Value in Brazil (June 2007). Available at SSRN: or

Alexandre Di Miceli da Silveira (Contact Author)

Alvares Penteado School of Business (Fecap) ( email )

Av. Liberdade, 532
São Paulo
+5511945909031 (Phone)


Lucas Ayres Barreira de Campos Barros

University of Sao Paulo ( email )

Avenida Professor Luciano Gualberto, 908
São Paulo, São Paulo 05508-010

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