Do internationalized companies have better governance? Lessons from Brazil

Andre Carvalhal

Applied Financial Economics, 2014, vol. 24, issue 10, 679-690

Abstract: Multinational enterprises (MNEs) have grown and expanded their presence significantly in recent years. Governing MNEs' activities in different countries is complex and demand efficient governance arrangements. Although there is an extensive literature on both MNEs and corporate governance, the relationship between MNEs and governance remains largely unexplored. This article analyses multiple aspects of governance of MNEs by using broad firm-level governance indices. We use comprehensive Brazilian data and find that MNEs have better governance in Brazil. Overall, MNEs have better disclosure, board and shareholder practices. We also report that ownership and control are less concentrated in MNEs than in local firms, and that the governance of MNEs is positively (negatively) associated with cash flow (voting) rights held by large shareholders. The results are robust to alternate measures of governance and to controlling for endogeneity and self-selection.

Date: 2014
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DOI: 10.1080/09603107.2014.899667

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