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Purpose – Firms and creditors may delay certain decisions in corporate reorganizations because of actions that require coordination. This paper investigates delays in voting on reorganization plans during claimholder general meetings in Brazil. Design/methodology/approach – Using a sample of 120 hand-collected reorganization plans, we present descriptive and regression (OLS, Poisson, negative binomial, and quantile) analyses to show the primary characteristics of delayed votes. Findings – Our results revealed that a high concentration of debt among the different classes of claimholders appeared to be related to fewer delays. Moreover, a higher number of banks and secured creditors with claims in the reorganization appeared to be positively correlated with delays. Finally, we argue that reorganization plans that require additional time to reach a vote are related to divestment proposals. Originality/value – There is still a lack of empirical results based on evaluations of multiple creditor characteristics and the reorganization proposals presented in firms’ reorganization plans. This is the first paper in Brazil to explore how conflicts of interest among different classes of creditors may relate to delays. Our paper contributes to the literature developed by Gilson (1990), Gilson et al. (1990), Brown et al. (1993), Franks and Tourus (1994), Helwege (1999), Ayotte and Morrison (2009), Ponticelli (2012), and Ivashina et al. (2015) regarding the characteristics of delaying reorganization plan votes during restructuring cases. We corroborate the results obtained by previous papers and provide an analysis of the role played by each class of claimholder in delaying plan votes for Brazilian firms Objetivo – Empresas e credores podem adiar certas decisões devido a ações queexigem coordenação nas recuperações de empresas. Este artigo investiga atrasosna votação de planos de recuperação durante as assembleias gerais de credoresno Brasil.Metodologia – Utilizando uma amostra de 120 planos de recuperação coletadosmanualmente, apresentamos análises descritivas e de regressão (mínimos quadradosordinários, ou MQO, Poisson, regressões binomiais negativas e quantílicas) paramostrar as principais características dos atrasos na votação.Resultados – Nossos resultados revelaram que uma alta concentração de dívidaentre as classes de credores está relacionada a menos atrasos. Além disso, umnúmero maior de bancos e credores com garantia real que possuem direitos decrédito na recuperação está positivamente correlacionado com os atrasos. Por fim,argumentamos que os planos de recuperação que requerem tempo adicional paraa votação estão relacionados a propostas de desinvestimento.Contribuições – Ainda faltam resultados empíricos baseados na avaliação decaracterísticas dos vários credores e da proposta de recuperação apresentada no planode recuperação da empresa. Este é o primeiro artigo no Brasil que explora comoos conflitos de interesse entre as classes de credores podem estar relacionados aosatrasos. Nosso artigo contribui para a literatura desenvolvida por Gilson (1990),Gilson et al. (1990), Brown et al. (1993), Franks e Tourus (1994), Helwege(1999), Ayotte e Morrison (2009), Ponticelli (2012) e Ivashina et al. (2015) sobreas características dos atrasos na votação do plano de recuperação durante os casosde reestruturação. Corroboramos os resultados obtidos em trabalhos anteriores efornecemos uma análise do papel desempenhado por cada classe de credores noatraso da votação do plano em empresas brasileiras. Objetivo – Empresas e credores podem adiar certas decisões devido a ações queexigem coordenação nas recuperações de empresas. Este artigo investiga atrasosna votação de planos de recuperação durante as assembleias gerais de credoresno Brasil.Metodologia – Utilizando uma amostra de 120 planos de recuperação coletadosmanualmente, apresentamos análises descritivas e de regressão (mínimos quadradosordinários, ou MQO, Poisson, regressões binomiais negativas e quantílicas) paramostrar as principais características dos atrasos na votação.Resultados – Nossos resultados revelaram que uma alta concentração de dívidaentre as classes de credores está relacionada a menos atrasos. Além disso, umnúmero maior de bancos e credores com garantia real que possuem direitos decrédito na recuperação está positivamente correlacionado com os atrasos. Por fim,argumentamos que os planos de recuperação que requerem tempo adicional paraa votação estão relacionados a propostas de desinvestimento.Contribuições – Ainda faltam resultados empíricos baseados na avaliação decaracterísticas dos vários credores e da proposta de recuperação apresentada no planode recuperação da empresa. Este é o primeiro artigo no Brasil que explora comoos conflitos de interesse entre as classes de credores podem estar relacionados aosatrasos. Nosso artigo contribui para a literatura desenvolvida por Gilson (1990),Gilson et al. (1990), Brown et al. (1993), Franks e Tourus (1994), Helwege(1999), Ayotte e Morrison (2009), Ponticelli (2012) e Ivashina et al. (2015) sobreas características dos atrasos na votação do plano de recuperação durante os casosde reestruturação. Corroboramos os resultados obtidos em trabalhos anteriores efornecemos uma análise do papel desempenhado por cada classe de credores noatraso da votação do plano em empresas brasileiras.

When a corporation presents a reorganization plan, it expects its creditors to approve the plan. This paper provides empirical evidence regarding the likelihood of approval based on reorganization plans for creditors in Brazil that require approval by employees; and by secure and unsecure debtholders. This paper involves a descriptive analysis of the main characteristics of reorganization plans by type of vote. Using a sample of 120 reorganization plans proposed by corporations from 2005 to 2014, we find that the labor class of creditors is likely to approve the reorganization plan even when the plan is rejected; plans with more heterogeneous payment for classes are less likely to be accepted; plans are less likely to be accepted when there are more unsecure creditors; and plans with divestment proposals are more likely to be accepted. Finally, as expected given the seniority position of secured debt, plans are less likely to be accepted when the portion of secured debt is higher, and the reverse is true for unsecured debt. Resumo Quando uma empresa apresenta um plano de recuperação judicial, espera-se que o plano seja aprovado por seus credores. Neste artigo, apresenta-se a evidência empírica sobre a votação dos credores trabalhistas, com garantia real e quirografário e a probabilidade de aprovação do plano de recuperação judicial no Brasil. O estudo aborda uma análise descritiva das principais características dos planos de recuperação judicial por classe de voto. Utilizando uma amostra de 120 planos de recuperação judicial apresentados por empresas entre 2005 e 2014, os resultados sugerem que: credores trabalhistas estão propensos a aprovar o plano de recuperação mesmo quando o plano é rejeitado pelas demais classes; planos com propostas de pagamento mais heterogêneas para as três classes de credores possuem menor chance de serem aceitos; a chance de aprovação do plano diminui nos casos em que mais credores quirografários participam da votação; e planos com proposta de venda de ativos possuem maior chance de serem aprovados. Finalmente, maior concentração da dívida na classe com garantia real diminui a chance de aprovação do plano, e o contrário ocorre na classe quirografária.

This study analyzes a unique dataset of 125 corporate reorganization filings in Brazil from 2006 to 2016 to understand the role of bank creditor seniority in bankruptcy outcomes of small- and medium-sized companies. We find that conflict between bank creditor classes is relevant for explaining reorganization outcomes and that it occurs when organizations are in the money. Additionally, bank seniority matters more than the bank’s debt share for explaining bankruptcy outcomes in creditor-oriented regimes. Finally, we find a concave relationship between favorable votes and the number of banks involved and between favorable votes and a company’s age.

This chapter compares capital budgeting techniques employed in listed and unlisted companies. We surveyed the chief financial officers (CFOs) of 398 listed companies and 300 large unlisted companies, and based on 91 respondents, the results suggest that the CFOs of listed companies tend to use less simplistic methods more often, for example: NPV and CAPM; while CFOs of unlisted companies are less likely to estimate the cost of equity, despite being large companies. These findings indicate that stock exchange listings may require greater sophistication of the capital budgeting process.

Central Bank supervision is one of the pillars of capital regulation. Based on a unique database built using supervision data from the Central Bank of Brazil, we evaluate the effectiveness of the Central Bank's supervision over banks given the Central Bank's proprietary credit rating and signaling requests for higher capital buffers. We also examine the main determinants of capital buffer management in addition to supervision. We find evidence that (i) Brazilian Central Bank supervision imposes excess capital buffer needs on banks, especially small and midsize banks; (ii) market discipline may play no role in driving capital ratios; and (iii) the business cycle has a negative influence on bank capital cushions, suggesting pro-cyclical capital management. We conclude that supervision plays a major role in markets where market discipline is weak and for smaller banks which act on pro-cyclical way.

Analisamos os determinantes de precificacao de Certificados de Recebiveis Imobiliarios (CRIs) com relacao ao efeito do rating, controlando por variaveis de tamanho e prazo. Verifica-se um premio medio adicional em CRIs de 1,0 p.p. quando comparados com debentures de prazos semelhantes e de mesmo rating. A justificativa desse premio e explicada pelos diferentes niveis de risco e ativos-objeto. Os diferentes niveis de risco sao percebidos pelas diversas garantias utilizadas sendo que 41% das emissoes possuem garantias pessoais de originadores (aval ou fianca). Somente 23% de todas as emissoes foram avaliadas por agencias de rating. Os efeitos do rating sao analisados e, em resumo, sao distintos para os segmentos residencial e comercial. A realizacao de avaliacoes de rating para instrumentos de divida imobiliaria como CRIs nao e uma solucao trivial para a reducao de spreads. Em media, o spread de CRI e da ordem de 3,2p.p. superior a curva de juros de mercado. Em relacao aos segmentos, o CRI residencial tem um spread medio 1,4p.p. superior ao CRI comercial. Para CRIs residenciais, o efeito de uma avaliacao de rating e positivo (reducao de spread) caso a emissao seja avaliada por alguma agencia de rating, enquanto que para os CRIs comerciais, o efeito e negativo. O efeito pode ser positivo para os CRIs comerciais (reducao de spread) em caso de avaliacao por agencia de rating internacional ou possuir notas de rating superiores a nota ‘A’. Em resumo, os CRIs residenciais apresentam um menor spread se avaliados por quaisquer agencias de rating enquanto que os CRIs comerciais devem apresentar notas altas de rating (e preferencialmente por agencias de rating internacionais) para que apresentem spreads significativamente menores. Para a reducao de riscos percebidos ou devido a baixa proporcao de emissoes com avaliacao de rating, tornou-se comum que as emissoes tenham melhorias de credito tais como a acumulacao de garantias, a subordinacao e um excesso de retorno identificado por altos spreads.

While trade credit may be used as a substitute for bank loans, we find empirical evidence that listed firms do use bank debt and trade credit as two complementary sources of financing in line with recent theoretical papers (e.g. Biais & Gollier, 1997) and evidence found in other empirical works (e.g. Alphonse, Ducret, & Séverin, 2006). By using a sample of 263 publicly-listed companies from 2006, our findings empirically support that trade credit may be used as (i) a sign of the firm’s quality, and (ii) a way of facilitating access to bank debt as trade credit seems to be a substitute for bank debt.

This paper analyzes the determinants of the differe ntial 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 i dentity of the controlling shareholders, with an em phasis on family control. We examined 87 Brazilian listed fir ms throughout the period, resulting in a sample of 3,287 observations. We found empirical evidence that changes in Corporate Law decreased (increased) the adva ntage of voting shares in terms of tag along rights reduc ed (incremented) DCP. However, we did not find empirical evidence that the voluntary granting of tag along r ights altered DCP. We also found evidence suggestin g that family control is positively associated with DCP le vel. Overall, our results indicate that regulations regarding shareholders’ rights and the identity of controllin g shareholders are the two relevant corporate gover nance variables for DCP level in environments characteriz ed by concentrated ownership structures.

This paper investigates the determinants of currency risk management in nonfinancial firms in Argentina, Brazil, Chile, and Mexico, based on a panel data sample of firms that list as American depositary receipts from 2001 to 2004. Our evidence indicates that derivatives held for hedging purposes can yield cash flows of the same order of magnitude of capital expenditures, operational earnings, and financial expense, unlike what was previously found by Guay and Kothari (2003) for U.S. firms. We study not only the decision to use derivatives, but also the magnitude of derivatives holdings and the importance of operational hedging in firms' risk management strategies. We find that economies of scale, financial distress costs, informational asymmetry, and growth opportunities are important for risk management decisions, and that firms do not hedge because of potential tax benefits.

he aim of this paper is to provide insights on the determinants of the indebtedness of Brazilian companies. Initially, this paper replicates the main empirical tests on the literature. The reduced explanatory power of the results led us to propose a new methodology using the GMM method of Blundell and Bond (1998), which points out companies with higher roportions of fixed assets on total assets present higher indebtedness. Our results indicate that estimation of the equations implied by the target leverage model tends to generate seriously biased estimates if the endogeneity of the covariates is not explicitly considered in the analysis.

We examine five bookbuilding processes in the Brazilian equity market from 2003 to 2004. In a bookbuilding process, the investment bank has the discretionary power to price the offer and to allocate shares among interested investors. We analyze the allocation determinants and we find empirical evidence that bookbuilding process induce investors to disclose superior information. In addition, we also find evidence that bookbuilding process allows the investment bank to benefit disperse ownership as well as to have a higher allocation for long-term investors

As debêntures padronizadas possibilitam aos investidores prescindir de complexas análises contratuais e cálculos sofisticados em mercados secundários. Este artigo analisa, com base em contratos de debêntures não padronizados, se, caso as diferenças contratuais fossem controladas estatisticamente, os ratings dessas debêntures seriam suficientes para captar os custos inerentes nas taxas de juros de suas emissões. Para tanto, analisamos uma amostra de 24 emissões de debêntures no período de 1999-2001, e verificamos se houve alguma diferença estatisticamente significativa (distribuição binomial) nas cláusulas contratuais entre as emissões com elevado rating e baixo rating. Concluímos que, para ratings elevados, a padronização afeta as taxas de juros como reflexo de seu rating. Contudo, para ratings baixos, a padronização não capta diferenças contratuais específicas, tais como repactuação programada e garantia.

We analyse the profile of the boards of directors of 142 Brazilian publicly-held companies in 1999. Directors were divided into four distinct categories, following Bhagat and Black (2000 Working Paper no. 143, Columbia Law School) criteria for the US market. Our survey analyses the degree of independence of directors in relation to their respective controlling shareholders. Our results indicate that the controlling shareholders’ representatives largely dominate the boards. One intriguing finding is that minority shareholders do not use the mechanisms at their disposal to elect directors. There seems to be low interest by non-controlling shareholders in participating in shareholders’ meetings, and consequently in selecting representatives for the board of directors. This could partly be explained by the lack of proxy voting mechanisms.

This article compares capital budgeting techniques employed in listed and unlisted companies in Brazil. We surveyed the Chief Financial Officers (CFOs) of 398 listed companies and 300 large unlisted companies, and based on 91 respondents, the results suggest that the CFOs of listed companies tend to use less simplistic methods more often, for example: NPV and CAPM, and that CFOs of unlisted companies are less likely to estimate the cost of equity, despite being large companies. These findings indicate that stock exchange listing may require greater sophistication of the capital budgeting process. Este artigo compara técnicas de orçamento de capital empregadas nas empresas listadas e não-listadas no Brasil. Emprega-se um survey dirigido aos Chief Financial Officers (CFOs) de 398 empresas listadas e 300 grandes empresas não-listadas e, com base em 91 respondentes, os resultados sugerem que os CFOs das empresas listadas tendem a usar mais intensamente métodos menos simplistas, e.g. VPL e CAPM, e que CFOs de empresas não-listadas menos provavelmente estimam o custo de capital próprio, mesmo se tratando de empresas de grande porte. Esses achados indicam que a listagem em bolsa pode requerer maior sofisticação do processo de orçamento de capital. El presente artículo compara las técnicas de presupuestación empleadas por las empresas brasileñas cotizadas y no cotizadas. Encuestamos a los Gerentes de Finanzas Corporativos (Chief Financial Officers, CFO) de 398 empresas cotizadas y 300 grandes empresas no cotizadas, y, con base en 91 encuestados, los resultados sugieren que los CFO de las empresas cotizadas tienden a usar con más frecuencia métodos menos simplistas; por ejemplo: NPV y CAPM, y los CFO de las empresas no cotizadas son menos propensos a estimar el costo de los fondos propios, a pesar de tratarse de grandes empresas. Estos resultados indican que la cotización de la bolsa de valores puede requerir un mayor perfeccionamiento del proceso de presupuestación de capital.

This paper analyzes the managerial flexibility embedded in oil and gas exploration and production. The analysis includes the economic impact of using different production techniques on the valuation of oil reserves. Two methodologies are used to evaluate the simulation of engineering techniques: (i) the real option approach; and (ii) the discounted cash flow (DCF) method. Given the external variables (e.g., oil price, interest rate), this paper evaluates the best engineering technique for oil recovery by using a valuation approach. We conclude that by appropriately combining different production techniques, the value of oil reserves can increase under the real option approach and can be higher than the value assessed under the DCF method. Since oil recovery includes many managerial choices, we argue that the real option approach is more appropriate than the DCF method. The paper concludes that concession time and dividend yield are the most sensitive parameters for the valuation of oil reserves.

Este trabalho teve como objetivo incluir flexibilidade gerencial (tais como técnicas de recuperação complementar de óleo) na avaliação de reservatórios. Concluímos que essas técnicas podem aumentar o valor dos reservatórios em até 25% segundo a teoria de opções reais. A principal vantagem da metodologia de teoria de opções em relação à tradicional técnica de fluxo de caixa descontado é levar em conta as questões operacionais da indústria do petróleo. Utilizamos dois modelos clássicos para a precificação de reservatórios de petróleo e aplicamos uma análise de sensibilidade para determinar quais fatores são mais relevantes no seu valor econômico. Como era de se esperar, em ambos os modelos, o tempo de concessão e a taxa de convenience e/ou dividend yield foram os fatores mais importantes. This paper analyzes the managerial flexibility embedded in oil reserves (such as gas and water injection techniques). We have concluded that these techniques can increase the value of oil reserves by up to 25% according to the theory of real options.The main advantage of the real options approach over the discounted cash-flow approach is to include the operational issues in the oil and gas industry. We have used two classical models to assess the value of oil reserves. We have also performed sensitivity analysis to confirm that both concession time and convenience and/or dividend yields are the most important factors.

This paper examines the role of financial covenants as substitutes for short-term debt and a possible trade off between short-term debt and long-term debt, especially for companies with growth opportunities. Using a sample of 159 corporate bonds issued on the Brazilian Market, we found evidence that: first, financial covenants and short-term debt are substitute tools to minimize agency conflict, as per literature confirming that stronger financial covenants could limit the possible expropriation of debt holders and in exchange debt holders may be willing to lend at longer terms and; second, companies with growth opportunities are willing to exchange short-term debt for long-term debt under the presence of covenants. Most importantly, this does not seem to be a restriction for financing growth opportunities.

We empirically examine the main determinants of the capital buffer management (capital exceeding the minimum required by regulation) for the Brazilian banking industry, in order to test whether banks respond to the previous and new fundamentals of capital regulation. We find evidence that regulatory capital requirements may influence banks behavior, since those with more volatile earnings and higher adjustments costs may decide to hold higher capital buffers. We also find that banks may follow a pecking order when deciding their capital levels, and larger banks present lower levels of capital ratios, which may be related to too-big-to-fail issues. Moreover, we provide evidence that: (i) Central Bank supervision exerts positive pressure on bank’s decision; (ii) market discipline may play a minor role in driving capital ratios; and (iii) the business cycle has a negative impact on bank’s capital cushion, suggesting a pro-cyclical capital management. The results contribute to the discussion of the implementation in Brazil of the macro-prudential regulatory policies discussed in the Basel Committee.

This paper analyzes the relationship between the financial health and organizational form of private health care providers in Brazil. It also examines the major determinants of customer satisfaction associated with the provider's organ-izational form. An adjusted Altman's z-score is used as an indicator of financial health. A proxy variable based on customer complaints filed at the Brazilian National Agency for Supplementary Health is used as an indicator for customer satisfaction. The study uses a sample of 270 private health care providers and their operations over the period 2003-2005. Panel data analysis includes control variables related to market, operations, and management. Principal results indicate that: (1) private health care providers benefit from economies of scale; (2) self-funded health plans have better financial health; (3) spending on marketing does not have a signif-icant impact on customer satisfaction in Brazil; (4) weak empirical evidence exists showing that good financial performance enhances customer's satisfaction. Este artigo analisa a situação financeira das operadoras de saúde suplementar no Brasil, de acordo com a modalidade de gestão. Adicionalmente, examina os principais determinantes para a satisfação do consumidor desses serviços. Como indicador principal de saúde financeira, utiliza-se uma versão adaptada do z-score de Altman. A proxy para satisfação do consumidor é o nível de reclamações fundamentadas registradas junto à Agência Nacional de Saúde Suplementar. Utilizamos uma amostra de 270 operadoras de saúde suplementar para o período 2003-2005, e regressões de dados em painel, com variáveis de controle de mercado, operacionais e de gestão. Os resultados principais indicam que (1) as operadoras de saúde se beneficiam de economias de escala; (2) as empresas que operam no modelo de autogestão têm situação financeira melhor que as demais; (3) as despesas com marketing não impactam a satisfação dos consumidores dos planos de saúde; (4) finalmente, encontra-se também alguma evidência empírica indicando que a boa situação financeira implica maior satisfação do consumidor.

This study analyzes the wave of Initial Public Offering (IPO) of Brazilian banks from 2005 to 2007. The results show that the banks that went public in this period showed ex-ante characteristics different from those of similar banks that remained privately held. Specifically, IPO-banks had greater profitability, larger loans/asset ratio, smaller proportion of non-performing loans and were more capital constrained than banks that remained private. These results show that the wave of bank IPOs cannot be explained simply by the market-timing theory, but probably is due to the greater growth opportunities of these banks relative to their competitors. Thus, market liquidity is a necessary, but not sufficient condition, to explain these IPOs. We also investigate the effect of the going public decision on the post-issue operational performance of these banks, and find evidence on the increase in the proportion of loans relative to total assets, associated with a rise in the proportion of nonperforming loans, even controlled by the credit boom occurred in the period. An improvement in managerial efficiency is also perceived, which may indicate economies of scale resulting from the going public process.