Ten adverse outcomes when manager focus on creating shareholder value: a review

Esta monografía examina la literatura que critica la gestión de negocios orientada a crear valor para los accionistas exclusivamente, por la vía de la maximización de los precios de sus acciones. Con base en un enfoque multidisciplinario, se revisan investigaciones empíricas y teóricas de campos como el derecho corporativo, la administración, las finanzas, economía, la ética empresarial, psicología social y la sociología de las organizaciones. Se destacan diez principales efectos perjudiciales de la adopción del paradigma del valor para el accionista en la administración de empresas. Se contribuye con la literatura,adicionalmente, presentando evidencia anecdótica a través de casos breves de negocios que ilustran estos resultados adversos. En conjunto, esta creciente literatura proporciona evidencia convincente de que gobernar las compañías para maximizar los precios actuales de sus acciones podría tener severas consecuencias negativas para todos los constituyentes corporativos, incluida la sociedad civil y los propios accionistas.This paper surveys the literature criticizing the view that managers should run companies aiming to create shareholder value by maximizing stock prices. Based on a multidisciplinary approach, I include empirical and theoretical papers from fields such as corporate law, management, finance, economics, business ethics, social psychology, and sociology of organizations. Ten main harmful effects from the adoption of the shareholder value paradigm stand out. I also add to the literature by presenting anecdotal evidence through short business cases illustrating these adverse outcomes. Together, this growing literature provides compelling evidence that governing companies in order to maximize current stock prices might lead to severe negative consequences for all corporate constituencies, including society and shareholders themselves

The Relevance of Tag along Rights and Identity of Controlling Shareholders for the Price Spreads between Dual-Class Shares: the Brazilian Case

This paper analyzes the determinants of the differential pricing of equity classes (the so-called dual-class premium [DCP]) in Brazil from 1995 to 2006 with a focus on two specific corporate governance aspects: i) the granting of tag along rights, a mandatory bid rule that extends to minority shareholders the right to sell their shares in case of a control transfer; and ii) the identity of the controlling shareholders, with an emphasis on family control. We examined 87 Brazilian listed firms throughout the period, resulting in a sample of 3,287 observations. We found empirical evidence that changes in Corporate Law decreased (increased) the advantage of voting shares in terms of tag along rights reduced (incremented) DCP. However, we did not find empirical evidence that the voluntary granting of tag along rights altered DCP. We also found evidence suggesting that family control is positively associated with DCP level. Overall, our results indicate that regulations regarding shareholders’ rights and the identity of controlling shareholders are the two relevant corporate governance variables for DCP level in environments characterized by concentrated ownership structures

Cultura antiética e desempenho das empresas com base nas avaliações dos empregados

Este artigo estuda a relação entre cultura antiética e desempenho financeiro das empresas brasileiras com base em uma análise de texto de mais de 100 mil avaliações de empregados publicadas no website Glassdoor. Um indicador original de cultura antiética foi elaborado a partir de 1.400 termos relativos a cinco dimensões éticas. Como principal resultado, constatou-se que empresas com maior pontuação no indicador de cultura antiética são menos lucrativas e que essa relação é relevante economicamente. Das cinco dimensões que compõem uma cultura antiética, a injustiça organizacional, a falta de consciência e o medo de retaliação foram as três mais negativamente vinculadas ao desempenho. Este é o primeiro artigo a documentar a relação entre cultura (anti)ética e desempenho corporativo usando avaliações on-line. Para investidores, a pesquisa contribui ao indicar que a mensuração da cultura ética é uma informação relevante para o valor das empresas

Atributos corporativos e concentração acionária no Brasil

Este artigo enfoca os possíveis determinantes da concentração do direito de voto e do direito sobre o fluxo de caixa por parte dos acionistas controladores das companhias abertas brasileiras. A análise investiga se variáveis endógenas das firmas e setoriais fazem com que algumas empresas tenham estrutura de propriedade mais concentrada do que outras submetidas ao mesmo ambiente contratual. Ao se aplicarem testes empíricos a um painel com 161 empresas entre os anos de 1998 e 2002, as variáveis testadas como possíveis determinantes não parecem infl uenciar a concentração acionária dos controladores das empresas analisadas. Os resultados oferecem evidência em favor da hipótese de influência da exogeneidade da estrutura de propriedade sobre o desempenho corporativo, adotada em trabalhos recentes.This article focuses on the possible determinants of the concentration of the right to vote and the rights over cash-flow of the controlling shareholders of publicly-quoted Brazilian companies. The analysis investigates if endogenous variables of firms and sectors mean that some companies have a more concentrated corporate structure than others that undergo the same contractual environment. When empirical tests were applied to a panel of 161 companies between 1998 and 2002, the variables that were tested as possible determinants seem not to have an influence on the shareholder concentration of the owners of the companies that were analyzed. The results offer evidence in favor of the hypothesis of the influence of the exogeneity of the ownership structure on corporate performance, which has been used in recent work

Corporate Governance and determinants of capital structure: empirical evidence from Brazilian markets

Este estudo investiga empiricamente a influência das práticas de Governança Corporativa [GC] das empresas sobre sua estrutura de capital. A qualidade da governança é mensurada por um índice abrangente proposto em pesquisa anterior e construído para uma amostra de empresas brasileiras com ações negociadas na Bovespa. Modela-se explicitamente, ademais, a possível causalidade bidirecional entre os construtos de interesse, na medida em que, como sugere a literatura especializada, a estrutura de capital pode influenciar a adoção pela empresa de certas práticas de GC. Os sistemas de equações propostos também incluem diversos determinantes potenciais tanto da estrutura de capital quanto da qualidade da GC sugeridos por pesquisas anteriores e são estimados pelos métodos TOBIT, Mínimos Quadrados Ordinário e Mínimos Quadrados de Três Estágios. Os resultados revelam significativa influência, com sentido positivo, das práticas de governança sobre a alavancagem financeira, em particular daquelas relacionadas com a dimensão estrutura de propriedade e conselho de administração, sugerindo que a GC pode ser determinante relevante da estrutura de capital. Os resultados não são conclusivos; por outro lado, quanto à influência da alavancagem sobre o índice completo de GC e sobre dois subíndices dele derivados.This study empirically investigates the influence of a firm's Corporate Governance practices [CG] over its capital structure. Governance quality is measured by a broad index proposed in previous research and constructed for a sample of Brazilian publicly traded companies. We explicitly model the possible bidirectional causality between the constructs of interest, because, as suggested by the specialized literature, capital structure can influence the adoption of certain CG practices by the firm. The postulated systems of equations also include various potential determinants of both capital structure and GC quality suggested by prior research. The equations were estimated by the TOBIT, Ordinary Least Squares, and Three-Stages Least Squares methods. Our results show a significant positive influence of CG practices over financial leverage, in particular of those practices related to the dimension ownership structure and board of directors, suggesting that CG can be an important determinant of capital structure. The results are not conclusive, on the other hand, regarding the influence of leverage over the full CG index and over two sub-indices derived from it

Crítica à teoria dos stakeholders como função-objetivo corporativa

At the core of the issue of management models on corporate governance are some basic questions such as these that must be addressed. What is the corporate-function? Which are the criteria for decision-making and performance evaluation? Literature cites two corporate objective-functions which stand out, one which maximizes shareholder value and the other which balances the interests of stakeholders. A critical approach to the stakeholder theory is made including the origin, concepts, advantages and disadvantages in a comparison to that of the shareholders. The conceptual deficiencies of the stakeholder theory point to the maximization of the shareholder value as a more robust objective-function for achieving a higher level of social welfare, maximization of corporate efficiency and productivity while providing a better evaluation of managers.No cerne das discussões sobre a concepção de modelos de gestão e de governança corporativa estão questões básicas que precisam ser respondidas por qualquer corporação, tais como: qual a função da empresa? Quais devem ser os critérios para a tomada de decisão e a avaliação de desempenho? Duas funções-objetivo da corporação destacam-se na literatura de Administração de empresas: a teoria da maximização da riqueza dos acionistas e a teoria de equilíbrio dos interesses dos públicos afetados pela companhia (stakeholders). O presente trabalho aborda de maneira crítica a teoria dos stakeholders, apresentando suas origens, conceitos, aspectos positivos e negativos e comparando-a com a teoria da maximização da riqueza dos acionistas. A análise expõe fragilidades conceituais da teoria dos stakeholders, que levam à consideração da teoria da maximização da riqueza dos acionistas como a função-objetivo da corporação mais robusta conceitualmente para o alcance de maior bem-estar social, a maximização da produtividade e eficiência da companhia e uma melhor avaliação do desempenho dos administradores

Facing the regulators: non-compliance with detailed mandatory compensation disclosure in Brazil

A preliminary court injunction based on alleged personal security risks to managers and directors gave Brazilian public companies the option of non-compliance with the most sensitive part of newly mandated compensation disclosure rules. We find, however, no association between state-level crime data and non-compliance, which is possibly motivated by agency conflicts. Non-compliers tend to present lower corporate governance (CG) quality, higher ownership concentration, larger total assets, and less profitability. State and foreign owned companies are significantly less likely non-compliers. Shareholders correctly anticipated that lower CG quality firms were more likely to exercise their non-compliance option, but may have been negatively surprised when some higher CG quality firms did not comply.Indisponíve

Endogeneity in panel data regressions: methodological guidance for corporate finance researchers

Purpose –To describe the use of specific lags (and/or temporal differences) of the original regressors as instrumental variables in a succinct and practical way, showing, by means of a theoretical discussion illustrated by an original simulation exercise, how combining these with adequate modeling of firm and time fixed effects can address not only the dynamic endogeneity problem, but also those derived from the presence of omitted variables, measurement errors, and simultaneity between dependent and independent variables. Design/methodology/approach – Monte Carlo simulation Findings – The traditional OLS, RE, and FE estimators may be inconsistent in the presence of endogeneity problems that are quite plausible in the context of corporate finance. On the other hand, the estimation methods for panel data based on GMM that use assumptions of sequential exogeneity of the regressors present alternatives that are capable of effectively overcoming all the problems listed (provided these assumptions are valid) even if the researcher does not have good instrumental variables that are external to the model Originality/value –The paper discusses and illustrates a greater number of endogeneity problems, showing how they are addressed by different estimators for panel data, using less technical and more accessible language for researchers not yet initiated in the intricacies of estimating dynamic models for panel data