Impacts of macroeconomics factors on bests practices of corporate governance in Brazil

Abstract

Relevant literature points out that the stock market development depends on setting good corporate governance practices, which, in itself, will make country development more dynamic. By adopting efficient corporate governance models we cant increase liquidity, negotiation volume, and valorization, also we reduce company stock volatility, therefore diminishing exposure of stock return to macro economical factors. The present paper aims at investigating the superior governance practices which reduce the exposure of stock return to external risks, essentially to macro economical factors. In order to obtain such information we have conducted comparative analysis of the Corporate Governance Index (CGI; or in Portuguese IGC) and the Ibovespa (Brazilian Stock Market Index) in relation to the macro economical variables we find in the academic literature which influence the most the national stock market. In terms of methodology, we have proceeded with a descriptive research of the quantitative type where we were able to estimate models in differences through the Ordinary Least Square model (OLS), almost-difference models with Generalized Least Square model (GLS). For the used methodology there are indications that the best corporate governance practices, measured according to the CGI, reduces the exposure of stock return to macro economical factors.