Impact of Corporate Governance on Financial Performance: Evidences in the Brazilian Stock Market
DOI:
https://doi.org/10.51341/cgg.v26i1.3021Keywords:
Governance indexes, Agency Theory, Financial performanceAbstract
Objective: Examine the impact of corporate governance on the financial performance of Brazilian companies with shares traded in the Brasil Bolsa Balcão (B3) between the years 2010 and 2020.
Method: Using annual data from a sample of 118 non-financial companies, regressions were estimated with panel data and instrumental variables approach. As metrics of corporate governance quality, we used two indexes that consider the mechanisms pointed out by the literature as efficient in reducing agency problems, as well as the listing of companies in the B3's Differentiated Levels of Corporate Governance. As measures of financial performance, we used the ratios Return on Equity (ROE), Return on Assets (ROA) and Earnings before interest, taxes, depreciation and amortization (EBITDA).
Originality/Relevance: The suggested governance quality indexes, mainly the IGOV8, which showed statistical significance in all estimated models, are simpler to obtain than the ones previously suggested in the literature, since they require fewer variables (inputs).
Results: The results indicate that in Brazil companies with better corporate governance quality tend to present statistically superior financial performance than those with lower quality.
Theoretical/Methodological contributions: In addition to contributing to the academy by providing insights into the importance of corporate governance in the financial performance of Brazilian companies, this work can help managers and investors. The proposed corporate governance indexes, in particular the IGOV8, can make it easier for companies to assess their own governance and thus identify areas for improvement. Furthermore, investors can use these tools to evaluate companies they are investing in or intend to do so.
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