Corporate Governance, Valuation and Performance: Evidence from a Voluntary Market Reform in Brazil
Financial Management, 2011, Vol. 40, No. 1, pp. 139-157
36 Pages Posted: 4 May 2011 Last revised: 27 Aug 2019
Date Written: April 1, 2011
In December 2000, the Sao Paulo Stock Exchange launched a new premium market segment for companies that voluntarily commit to "good practices of corporate governance." We construct a composite index (NM6) that combines six proxies for the main governance practices targeted by Bovespa’s reform. We find that higher scores for our index are related to greater market value but not to better operating performance. An investment strategy that purchased stocks of firms with high NM6 and sold stocks of firms with low NM6 would have earned abnormal returns of 10.68% per year from 2001 to 2005.
Keywords: Corporate governance, firm valuation, operating performance, emerging markets, Brazil
JEL Classification: G34
Suggested Citation: Suggested Citation