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Essays on Corporate Governance in Brazil

André Luiz Carvalhal da Silva

Corporate governance is an important subject and has received a lot of attention from academics, market practitioners, and regulators. The literature on corporate governance usually covers different governance attributes, such as ownership, agency conflicts, board of directors, transparency, executive compensation, among other topics (Shleifer and Vishny, 1997).

This book presents three essays on corporate governance in Brazil. It contributes to the governance literature by examining the following issues: “Do State-owned enterprises have worse governance? Evidence from Brazil”; “Do cross-listed companies have better governance? Evidence from Brazil”; and “Does the governance of banks differ from nonfinancial firms? Evidence from Brazil”.

From a governance perspective, the Brazilian market provides interesting insights to answer these questions. First, Brazil has the 8th largest GDP in the world and the three types of companies studied in the essays (state-owned, cross-listed, and banks) have an important role in the country. Second, Brazil adopts the civil-law system, which provides worse governance and legal protection to investors when compared to developed countries (La Porta et al., 2000, 2002). Finally, Brazil has several firms listed on US stock exchanges and many of them belong to the state and are currently involved in corruption scandals and poor governance practices (Bloomberg, 2016; Financial Times, 2016).

We measure governance quality by computing a corporate governance index (CGI), which covers 20 governance items and is based on the governance literature (Black et al., 2006; Leal and Carvalhal, 2007). We also investigate the presence on “New Market”, created by the Brazilian stock exchange (B3) to attract enterprises with improved governance standards.

In the first essay, we analyse the governance of state-owned enterprises (SOEs), which represent 40% of GDP worldwide (World Bank, 2014). Most studies on governance of SOEs focus on their governance challenges, such as multiple goals (financial and/or social), political influence, and low disclosure (Borisova et al., 2012; Guedhami et al., 2009). However, much of the literature on the governance of SOEs examine isolated aspects of corporate governance or analyse short-dated panels (Bruton et al., 2015; Florio and Fecher, 2011; Grossi et al., 2015; Megginson and Netter, 2001).

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