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Article
Publication date: 13 September 2018

Paula Guimaraes, Ricardo P.C. Leal, Peter Wanke and Matthew Morey

This paper aims to investigate the long-term impact of shareholder activism on Brazilian listed companies.

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Abstract

Purpose

This paper aims to investigate the long-term impact of shareholder activism on Brazilian listed companies.

Design/methodology/approach

This study uses a sample of 194 companies in 2010, 2012 and 2014 and a two-stage data envelopment analysis to generate an efficiency score based on corporate governance, ownership structure and financial characteristics of companies. In the second stage, the study applies a bootstrap truncated regression to identify whether there is a relationship between the efficiency scores and a company-level activism index.

Findings

The results show a negative correlation between the efficiency scores and the activism index, suggesting that activist shareholders tend to target less efficient companies. A time analysis over the period 2010-2014 does not offer evidence of impacts of activism on changes of the efficiency scores.

Practical implications

Activist shareholders target less efficient companies. Shareholder activism increased after regulation that facilitated shareholder voting and required greater company transparency was introduced.

Originality/value

The two-stage nature of the procedure used in the analysis ascertains that this result is not spurious, assuring data separability between productive resources and contextual variables. This study contributes to the scarce literature on activism in emerging markets.

Details

Corporate Governance: The International Journal of Business in Society, vol. 19 no. 1
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 5 March 2018

Flávia Schwartz Maranho and Ricardo Leal

The relationship between the role played by corporate governance (CG) mechanisms and shareholder wealth is an important and mature topic in some countries and regions. However…

951

Abstract

Purpose

The relationship between the role played by corporate governance (CG) mechanisms and shareholder wealth is an important and mature topic in some countries and regions. However, despite the considerable number of studies, the results are still inconclusive. The purpose of this paper is to contribute to the debate around the theme in Latin America through a meta-analysis.

Design/methodology/approach

The study used meta-analytic procedures to review 42 articles produced by researchers from Latin American countries, whose samples were composed of Latin American firms.

Findings

The results suggest that CG best practices are associated with better Latin American firm performance. The evidence also suggests that results are moderated by the characteristics of boards of directors, the ownership, and control structure and various simultaneous CG mechanisms, through broad indices and special CG trading segments.

Originality/Value

The relationship between GC and firm performance possesses certain peculiarities in the case of Latin American countries and the literature on the region is certainly not as abundant and mature. As most of the articles reviewed were written in Portuguese and Spanish and published in local journals, the consolidation produced should also be useful for researchers throughout the world by enabling them to access their ideas.

Propósito

A relação entre o papel desempenhado pelos mecanismos de governança corporativa (GC) e a riqueza dos acionistas é um tópico importante e maduro em alguns países e regiões. No entanto, os resultados ainda se apresentam ambíguos, apesar do grande número de estudos. Este ensaio pretende contribuir para o debate do tema na região através de uma meta análise.

Diseño/metodología/enfoque

O trabalho fez uso de procedimentos meta-analíticos para revisar 42 artigos produzidos por pesquisadores da região e de outras localidades, cujas amostras são compostas por empresas de países da América Latina.

Recomendaciones

Os resultados sugerem que de forma geral melhores práticas de GC são associadas a um melhor desempenho das empresas latino-americanas. Este trabalho sugere também que os resultados encontrados são moderados pelas características dos conselhos de administração, da estrutura de propriedade e controle e de diversos mecanismos simultâneos de GC, como índices amplos e segmentos especiais de GC.

Originalidad/Valor

Esta relação possui peculiaridades quando se tratam de países latino-americanos e a literatura sobre a região certamente não se apresenta tão abundante e madura. Acredita-se que a consolidação produzida será útil para pesquisadores ao redor do mundo, uma vez que a maioria dos artigos revisados foi escrita em português ou espanhol e publicada em periódicos locais, o que não a torna acessível a todos.

Details

Academia Revista Latinoamericana de Administración, vol. 31 no. 1
Type: Research Article
ISSN: 1012-8255

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Article
Publication date: 7 August 2017

Alexandre Carneiro and Ricardo Leal

The purpose of this paper is to contrast three investment choices within the reach of individual investors: naive portfolios of Brazilian stocks; actively managed stock funds; and…

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Abstract

Purpose

The purpose of this paper is to contrast three investment choices within the reach of individual investors: naive portfolios of Brazilian stocks; actively managed stock funds; and the Ibovespa index, which represents passive management as well as to offer insights on the performance of professional asset managers in this large emerging market.

Design/methodology/approach

Equally weighted portfolios contained between 5 and 30 stocks to keep transaction costs low. Stock selection used the Ibovespa constituents and considered value (dividend yield (DY) and price-to-book ratio), momentum (past returns), and liquidity, as well as the Sharpe ratio (SR) over the 2003-2012 period, rebalancing three times a year.

Findings

Cumulative returns of naive portfolios are large. They frequently outperform the index for all values of n. They also outperform stock funds, particularly when the invested amount exceeds US$25,000, due to transaction costs. Yet, expected out-of-sample SRs corrected for errors in estimates are very low, suggesting that one should not count on this historical performance in the future. Naive portfolios may simply be more exposed to additional value, size, and momentum risks. Results are sensitive to time period selection.

Practical implications

Naive portfolios may be attractive to individual investors in Brazil relative to stock funds, which seem to strive to keep volatility low and may be better when the investment amount is low. There may be merit for value or momentum stock selection strategies when forming small equally weighted portfolios.

Originality/value

The paper contrasts realistic stock investing alternatives for individuals, it provides a view of stock fund performance in Brazil, and offers practical implications that may be pertinent in other emerging stock markets.

Objetivo

Contrastar três opções de investimento ao alcance de investidores individuais: carteiras ingênuas de ações brasileiras; fundos de ações de gestão ativa; e o índice Ibovespa, que representa a gestão passiva. Oferecer informações sobre o desempenho de gestores de ativos profissionais neste grande mercado emergente.

Método

As carteiras igualmente ponderadas continham entre 5 e 30 ações para manter os custos de transação baixos. A seleção de ações utilizou os componentes do Ibovespa e considerou o valor (rendimento de dividendos e relação preço/valor patrimonial), momentum (retornos passados) e liquidez, bem como o Índice de Sharpe no período 2003-2012, rebalanceando três vezes ao ano.

Resultados

Os retornos acumulados de carteiras ingênuas são grandes. Eles frequentemente superam o índice para todos os valores de N. Eles também superam os fundos de ações, particularmente quando o montante investido excede US$ 25,000, devido aos custos de transação. Contudo, os Índices de Sharpe esperados fora de amostra corrigidos por erros nas estimativas são muito baixos, sugerindo que não se deve contar com este desempenho histórico no futuro. As carteiras ingênuas podem simplesmente estar mais expostas a fatores riscos adicionais, tal como os de valor, tamanho e momentum. Os resultados são sensíveis à seleção do período de tempo.

Implicações práticas

As carteiras ingênuas podem ser atrativas para os investidores individuais no Brasil em relação aos fundos de ações, que parecem se esforçar para manter a volatilidade baixa e podem ser melhores quando o valor do investimento é baixo. Pode haver mérito para estratégias de seleção de ações de valor ou momentum ao formar carteiras igualmente ponderadas pequenas.

Originalidade/valor

O artigo contrasta alternativas realistas de investimento em ações para indivíduos, oferece uma visão do desempenho dos fundos de ações no Brasil e oferece implicações práticas que podem ser pertinentes em outros mercados emergentes.

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Article
Publication date: 1 September 2002

Ricardo P.C. Leal and Claudia L.T. De Oliveira

We survey board practices in Brazil. Brazilian companies are commonly controlled by family groups or through shareholders agreements. Controlling shareholders hold a very large…

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Abstract

We survey board practices in Brazil. Brazilian companies are commonly controlled by family groups or through shareholders agreements. Controlling shareholders hold a very large portion of voting shares, much more than the minimum necessary to retain control. There is widespread evidence of shareholder expropriation, legal protection is weak, and stock issuance has been halted by low valuations and tax avoidance. Half of the boards are either too small or too big. Board committees are ineffective. Board procedures are rarely formalized and board members and CEOs are not evaluated in most cases. Most board members are not shareholders. No more than 21 percent of board members are independent and only 2 percent of them are elected by independent shareholder groups. It is likely the improvements in board structure and procedures will be restricted to large public corporations with foreign stock ownership while most companies avoid going public.

Details

Corporate Governance: The international journal of business in society, vol. 2 no. 3
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 13 April 2010

Alexandre Di Miceli da Silveira, Ricardo Pereira Câmara Leal, André Luiz Carvalhal‐da‐Silva and Lucas Ayres B. de C. Barros

This paper aims to investigate the determinants and the evolution of voluntarily adopted firm‐level corporate governance practices in Brazil from 1998 to 2004 using broad

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Abstract

Purpose

This paper aims to investigate the determinants and the evolution of voluntarily adopted firm‐level corporate governance practices in Brazil from 1998 to 2004 using broad corporate governance scores.

Design/methodology/approach

The authors employ a robust panel‐data procedure that accounts for the main sources of endogeneity to a very representative panel of Brazilian firms over a six‐year period. They address the endogeneity that arises from the simultaneous determination of the quality of corporate governance practices, the dependent variable, and possibly several firm attributes that are commonly employed as the determinants of such practices and are supposedly independent. Specifically, theoretical arguments and empirical evidence strongly suggest that the quality of corporate governance practices may influence some of the variables commonly used as its determinants just as much as they may be influenced by them.

Findings

The paper finds that firm‐level corporate governance practices are steadily improving but there is much room for improvement. Heterogeneity has increased. Voluntarily adhering to new stricter listing requirements is associated positively with improvements in firm‐level corporate governance practices. Reducing or not using non‐voting shares improves corporate governance practices.

Research limitation/implications

The authors found no clear evidence of the influence of other potential determinants of the quality of corporate governance, such as growth prospects, firm size, firm value, and ownership structure. Thus, they doubt previous findings that suggest a causal relationship from value and ownership to corporate governance practices because value and ownership seem to be determined endogenously.

Practical implications

Policies directed to reduce the use of non‐voting shares should be implemented. Creating strict listing requirements that may be adopted voluntarily by firms could be a feasible solution to improve the quality of corporate governance practices in emerging market countries. Firms in an emerging market that find that issuance in the USA became too expensive or demanding may offer a substitute listing environment with credible requirements to foreign investors. Premium listings may partially compensate emerging market exchanges for their loss of trading to major markets.

Originality/value

The paper examines the evolution of the voluntary adoption of corporate governance practices in Brazil from 1998 through 2004 while most studies use cross‐section samples over one or a few years. Further, this is one of a few papers to analyze the impact of ownership structure on the quality of corporate governance practices by segregating control and cash flow rights.

Details

Corporate Governance: The international journal of business in society, vol. 10 no. 2
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 1 December 1997

Ricardo P. Leal and Thomas L. Powers

Technological innovation is a major competitive input that directly translates into long‐term competitive advantage. Presents the results of research that examines innovative…

464

Abstract

Technological innovation is a major competitive input that directly translates into long‐term competitive advantage. Presents the results of research that examines innovative activity by country, based on several measures of technological performance. The patterns of inventiveness reported reflect present product development activities that will in the future directly impact the ability of a country to bring unique and high value‐added new products to market. Develops a taxonomy that suggests that there are distinctively different patterns of inventiveness by country. Discusses marketing implications of the taxonomy and proposes future research.

Details

International Marketing Review, vol. 14 no. 6
Type: Research Article
ISSN: 0265-1335

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Article
Publication date: 26 August 2014

Dimas Hartz Pinto, Celso Funcia Lemme and Ricardo Pereira Câmara Leal

– The purpose of this paper is to examine the risk-adjusted performance of Brazilian SRI stock funds.

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Abstract

Purpose

The purpose of this paper is to examine the risk-adjusted performance of Brazilian SRI stock funds.

Design/methodology/approach

Risk-adjusted performance of 11 Brazilian socially responsible investment (SRI) funds relative to local index funds and matched pairs of funds.

Findings

SRI funds performed as well as portfolios representing the broad market on a risk-adjusted basis, both before and during the global financial crisis. Independent investment houses are not interested in SRI funds. Large financial conglomerates may see these funds as part of their corporate social responsibility image strategy.

Research limitations/implications

Brazilian SRI funds are a very small niche in the stock mutual fund universe of the country, thus, the small sample (universe) of SRI funds, as far as the author's knew. One cannot say that independent asset managers do not include SRI screening in their stock selection criteria. The use of SRI screening by the most prominent independent asset managers is a potential topic for future research.

Practical implications

Brazilian SRI funds did not represent an extra screening filter cost to their investors. The majority of asset managers do not consider this strategy important enough to deserve an exclusive vehicle.

Social implications

As SRI funds did not posit an extra screening cost, they may deserve a greater share of the mutual fund market, stimulating more SRI.

Originality/value

The performance of Brazilian SRI stock funds had not been examined in the international literature. Brazil has vast natural resources, a very large economy and the fourth largest mutual fund industry in the world, but was overlooked.

Details

International Journal of Managerial Finance, vol. 10 no. 4
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 1 June 2005

Beatriz Vaz de Melo Mendes and Ricardo Pereira Câmara Leal

Proposes a new covariance matrix robust estimator able to capture the correct orientation of the data and the large unconditional variance caused by occasional high volatility…

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Abstract

Purpose

Proposes a new covariance matrix robust estimator able to capture the correct orientation of the data and the large unconditional variance caused by occasional high volatility periods.

Design/methodology/approach

Derives easy‐to‐compute estimates for the center and covariance matrix of a data set. The method finds the correct orientation of the data through a robust estimator and the variances through the classical sample covariance matrix.

Findings

Simulation experiments confirm the good performance of the proposed estimator under ε‐contaminated normal models and multivariate t‐distributions.

Practical implications

Provides illustrations of the usefulness of this practical tool for the finance industry, in particular when constructing efficient frontiers. Shows that robust portfolios yield higher cumulative returns and possess more stable weights compositions.

Originality/value

It provides an alternative estimator for the covariance matrix able to find a good fit for the bulk of the data as well as for the extreme observations, which could be plugged in widely used financial tools.

Details

International Journal of Managerial Finance, vol. 1 no. 2
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 1 January 2004

Ashley Burrowes, Horst Feldmann, Mareile Feldmann and John MacDonald

Eckbo, Masulis, & Norli (2000) question previous examination of initial public offering (IPO) underperformance with the keen argument that the increase in the number of traded…

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Abstract

Eckbo, Masulis, & Norli (2000) question previous examination of initial public offering (IPO) underperformance with the keen argument that the increase in the number of traded shares and the infusion of equity reduce two significant premia in the stock’s return, namely, liquidity risk and financial risk. The new market for high (expected) growth stock in Germany is examined for evidence of underpricing, underperformance, and liquidity improvements during the first two complete years of operation – 1998 and 1999. The initial trading period examines the offering day and also the first ten days of trading (for the investor who can not get allocation but enters the secondary market). The postissue performance study period is taken as the 5‐day period one‐year after the IPO. Using regression of four underpricing measures upon issuing firm characteristics deemed important from the extant literature, we seek to explain the degree of underpricing discovered. We find that substantial underpricing occurs and performance is high one year later, even adjusted for the German market return for the period or the firm‐specific sector performance for the same period. Trading dwindles for most stocks after the offering day. One year later, the trading of the stock is even lower. We do find that the more active the trading in the initial period, the greater the returns and trading one year after.

Details

Managerial Finance, vol. 30 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 January 1998

Allen D. Morton

This paper uses a multifactor logit model to analyze the aftermarket performance of randomly chosen IPO's in hot and cold markets. The theories of risk aversion and utility…

298

Abstract

This paper uses a multifactor logit model to analyze the aftermarket performance of randomly chosen IPO's in hot and cold markets. The theories of risk aversion and utility maximization, in conjunction with the paper's empirical results, suggest that cold market investors are more risk averse than are hot market investors.

Details

Studies in Economics and Finance, vol. 19 no. 1/2
Type: Research Article
ISSN: 1086-7376

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