Ownership Concentration and Governance Quality of Brazilian Firm

Isac de Freitas Brandão () and Vicente Crisóstomo
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Isac de Freitas Brandão: Universidade Federal do Ceará

Brazilian Review of Finance, 2015, vol. 13, issue 3, 438-469

Abstract: The relationship between ownership concentration and corporate governance quality is analyzed in Brazil. Models are estimated by the system generalized method of moments (GMM) for a balanced panel of 85 companies in the period 2010-2013. The results indicate that the concentration of ownership has an adverse effect on the quality of corporate governance, as measured by an index based on 28 voluntary good governance practices. The negative linear relationship indicates that large shareholders are unfavorable to adoption of best corporate governance practices. Additionally, the negative quadratic relationship reinforces this result to high levels of concentration highlighting the possibility of expropriation of minority shareholders. Less ownership concentration favors the quality of corporate governance suggesting that the need for coalition to control decreases the power of the main shareholder, possibly helping to alleviate the conflict between controlling and minority shareholders under the principal-principal agency model theoretical framework.

Keywords: Corporate governance quality; ownership concentration; agency conflicts; Brazil. (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2015
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