Search

This study aim was to verify if Brazilian firms that adopt good corporate governance practices have a higher capital structure adjustment speed. To this end, an unbalanced panel sample of 165 non-financial firms listed on the B3 between 2010 and 2021 was adopted. The adjustment speed heterogeneity was verified by statistically comparing the estimates in two subsamples: i) of firms listed in some B3's governance special segment; and ii) firms in the basic segment. In each sample cut, a dynamic partial adjustment model was estimated with the same leverage target determinants through the dynamic panel fractional estimator of Elsas and Florysiak (2015). The results exposed that the average leverage and the speed of adjustment of Brazilian firms with special governance practices are significantly higher. Therefore, corroborating with the dynamic Trade-Off model with agency costs by Morellec et al. (2012). [ABSTRACT FROM AUTHOR]

This Article focuses on the power and corporate governance significance of the three largest index fund managers commonly referred to collectively as the "Big Three." We present current evidence on the substantial voting power of the Big Three and explain why it is likely to persist and, indeed, further grow. We show that, due to their voting power, the Big Three have considerable influence on corporate outcomes through both what they do and what they fail to do. We also discuss the Big Three's undesirable incentives both to underinvest in stewardship and to be excessively deferential to corporate managers. In the course of our analysis, we reply to responses and challenges to our earlier work on these issues that have been put forward by high-level officers of the Big Three and by a significant number of prominent academics. We show that these attempts to downplay Big Three power or the problems with their incentives do not hold up to scrutiny. We conclude by discussing the substantial stakes in this debate--the critical importance of recognizing the power of the Big Three, and why it matters. [ABSTRACT FROM AUTHOR]

Prior research is not conclusive whether information asymmetries or managerial discretion are the cause of observed investment-cash flow sensitivity. This paper examines the effect of family firms' governance heterogeneity on firm's investment-cash flow sensitivity in Brazil. The Brazilian economic and corporate governance context present several idiosyncratic features, including weak minority shareholder protection, an underdeveloped capital market, macro-economic uncertainties, the presence of controlling shareholders (especially families), and the excessive use of control-enhancing mechanisms, allowing us to explore in greater detail the drivers of investment-cash flow sensitivity. We find that investment is more sensitive to cash flow for firms with a highly entrenched family presence (divergence between corporate control and voting rights coupled with family management) than in less entrenched family firms. This result emerges primarily due to financial constraints from asymmetric information, rather than agency problems of free cash flow from abuse of managerial discretion. Our findings shed new light on the role of excessive control rights in investment decisions, allowing family managers to reallocate capital to cope with financial constraints in times of economic uncertainties. • Family entrenched firms reduce the investment-cash flow sensitivity. • Entrenched owners are stewards in times of economic uncertainty. • Underinvestment due to information asymmetries seems to prevail. • There is no evidence of private benefits of control in family entrenched firms. [ABSTRACT FROM AUTHOR]