Endogeneity of Brazilian corporate governance quality determinants

Título: Endogeneity of Brazilian corporate governance quality determinants

Autores: Alexandre Di Miceli da Silveira, Ricardo Leal, André Luiz Carvalhal da Silva, Lucas Ayres Barros

Resumo/Sinopse: This paper aims to investigate the determinants and the evolution of voluntarily adopted firm‐level corporate governance practices in Brazil from 1998 to 2004 using broad corporate governance scores. We employ a robust panel‐data procedure that accounts for the main sources of endogeneity to a very representative panel of Brazilian firms over a six‐year period. We address the endogeneity that arises from the simultaneous determination of the quality of corporate governance practices, the dependent variable, and possibly several firm attributes that are commonly employed as the determinants of such practices and are supposedly independent. Specifically, theoretical arguments and empirical evidence strongly suggest that the quality of corporate governance practices may influence some of the variables commonly used as its determinants just as much as they may be influenced by them. We find that firm‐level corporate governance practices are steadily improving but there is much room for improvement. Heterogeneity has increased. Voluntarily adhering to new stricter listing requirements is associated positively with improvements in firm‐level corporate governance practices. Reducing or not using non‐voting shares improves corporate governance practices. We find no clear evidence of the influence of other potential determinants of the quality of corporate governance, such as growth prospects, firm size, firm value, and ownership structure. Thus, we doubt previous findings that suggest a causal relationship from value and ownership to corporate governance practices because value and ownership seem to be determined endogenously.

Data de publicação: 2010

Periódico/Editora: Corporate Governance

Edição: 10

Palavras-chave: Corporate governance, Corporate ownership, Corporate finance