DETERMINANTS OF CORPORATE GOVERNANCE QUALITY OF BRAZILIAN LISTED COMPANIES

Abstract

This paper investigates the determinants of firm-level corporate governance of Brazilian listed companies, trying to uncover which firm’s characteristics lead some companies to have higher corporate governance ratings than others in the same contractual environment. A corporate governance index was built based on four dimensions considered important by the literature for evaluating governance practices: access to information; information content; Board of Directors’ structure; and ownership and control structure. A multiple regression analysis was conducted using cross-sectional data from a sample of 161 companies and a set of explanatory variables whose choice was based on the relevant literature. The results suggest that ownership structure influences corporate governance ratings. Specifically, it was found a significant negative relation between control rights held by controlling shareholders and the corporate governance level of quality. A similar negative relation was obtained between control rights in excess of cash flow rights of controlling shareholders and the corporate governance rating. Furthermore, the results indicate that larger companies, ADR issuers, and firms with better performance display, on average, better corporate governance. The adhesion to Bovespa's corporate governance differentiated levels does not seem to influence firm’s governance ratings.