Corporate governance and capital markets' reaction to financial statement disclosure

Authors

  • Paulo Renato Soares Terra Universidade Federal do Rio Grande do Sul; Escola de Administração; Programa de Pós-Graduação em Administração
  • João Batista Nast de Lima Centro Universitário Feevale; Instituto de Ciências Sociais Aplicadas

DOI:

https://doi.org/10.1590/S1519-70772006000300004

Keywords:

Disclosure, Market Efficiency, Corporate Governance, Event Study, Emerging Markets

Abstract

This study investigates whether disclosure of companies' financial statements influences the market pricing of their stocks by employing an event study in the Brazilian stock market. Also, it examines whether market reaction to the information contained in the financial statements is different for firms which signal good corporate governance practices in comparison with firms in general. The study comprises 3,682 observations of 255 firms over an 8-year period (1995-2002), representing the most liquid stocks listed in the Sao Paulo Stock Exchange (Bovespa). Eight subsamples are segmented from the "Total" sample, with the purpose of investigating investors' reaction to different types of firms. Empirical results indicate that investors react differently to firms that show some signs of good corporate governance practices. Significant abnormal returns are found for only two sub-samples (firms with timely financial statement disclosure and privately-owned firms) in relation to their peers (firms that delayed disclosure of their financial statements and state-owned firms).

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Published

2006-12-01

Issue

Vol. 17 No. 42 (2006)

Section

naodefinida

License

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How to Cite

Terra, P. R. S., & Lima, J. B. N. de. (2006). Corporate governance and capital markets’ reaction to financial statement disclosure . Revista Contabilidade & Finanças, 17(42), 35-49. https://doi.org/10.1590/S1519-70772006000300004