CORPORATE GOVERNANCE, VALUE CREATION AND ECONOMIC AND FINANCIAL PERFORMANCE: EVIDENCES OF BRAZILIAN MARKET WITH PANEL DATA, 2005-2011

Abstract

The purpose of this article is to verify if voluntary adherence to the highest standards of corporate governance (shares traded in the Differentiated Levels of Corporate Governance and in BM & FBovespa’s New Stock Exchange) by Brazilian companies resulted in the creation of value and in higher economic and financial performance after accession and in comparison with companies with shares listed in the traditional market. Empirical research was conducted in a non-probabilistic sample of 66 companies listed in BM&FBovespa, 25 of which in the traditional market (reference group), 25 already listed in some level of differentiated governance before 2005 and 16 who migrated during the analyzed period. Quarterly data were analyzed from 2005 to 2011, forming a balanced panel with 1,848 observations. The tests were conducted in six models with panel data (fixed and random effects) for value creation variables (Tobin's q and Market-to-book ratio) and economic and financial performance (ROA, ROE, Net Income and EBIT). Some control variables were also inserted (leverage, size, concentration of ownership, type of control and issuance of ADRs). The results found indicated that companies that have adopted different practices of GC are more likely to create value to shareholders than the ones in the traditional market, but present a poorer economic and financial performance (EBIT and net profit).