SSRN Working Papers
Опубликовано на портале: 16-04-2007Ricardo P. C. Leal, Andre L. Carvalhal-da-Silva SSRN Working Papers. 2005.
We construct a corporate governance practices index (CGI) from a set of 24 questions that can be objectively answered from publicly available information. Our goal was to measure the overall quality of corporate governance practices of the largest possible number of firms without the biases and low response ratios typical of qualitative surveys. CGI levels have improved over time in Brazil. CGI components demonstrate that Brazilian firms perform much better in disclosure than in other aspects of corporate governance. We find very high concentration levels of voting rights leveraged by the widespread use of indirect control structures and non-voting shares. Control has concentrated between 1998 and 2002. We do not find evidence for either entrenchment or incentives in Brazil using ownership percentages but find that the separation of control from cash flow rights destroys value. The CGI maintains a positive, significant, and robust relationship with corporate value. A worst-to-best improvement in the CGI in 2002 would lead to a .38 increase in Tobin's q. This represents a 95% rise in the stock value of a company with the average leverage and Tobin's q ratios. Considering our lowest CGI coefficient, a one point increase in the CGI score would lead to a 6.8% rise in the stock price of the average firm in 2002. We found no significant relationship between governance and the dividend payout but there are indications that dividend payments are greater when control and cash flow rights concentration are greater. We place our results in context by offering a comparative analysis with Chile. We would offer a sound "yes" if asked whether good corporate governance practices increase corporate value in Brazil.
Опубликовано на портале: 01-11-2007Cheng Hua SSRN Working Papers. 2006.
We develop a dynamic model in which traders have differential information about the true value of the risky asset and trade the risky asset with proportional transaction costs. We show that without additional assumption, trading volume can not totally remove the noise in the pricing equation. However, because trading volume increases in the absolute value of noisy per capita supply change, it provides useful information on the asset fundamental value which cannot be inferred from the equilibrium price. We further investigate the relation between trading volume, price autocorrelation, return volatility and proportional transaction costs. Firstly, trading volume decreases in proportional transaction costs and the influence of proportional transaction costs decreases at the margin. Secondly, price autocorrelation can be generated by proportional transaction costs: under no transaction costs, the equilibrium prices at date 1 and 2 are not correlated; however under proportional transaction costs, they are correlated - the higher (lower) the equilibrium price at date 1, the lower (higher) the equilibrium price at date 2. Thirdly, we show that return volatility may be increasing in proportional transaction costs, which is contrary to Stiglitz 1989, Summers & Summers 1989’s reasoning but is consistent with Umlauf 1993 and Jones & Seguin 1997’s empirical results