Does good corporate governance pay off in the long-run? Evidence from stock market segment switches in Brazil

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Luiz Moura
Lars Norden
http://orcid.org/0000-0002-2222-7797

Abstract

We investigate the long-run effects of higher standards of corporate governance in the stock market. We consider Brazilian firms that switched from the traditional segment to the Nível 1, Nível 2 or Novo Mercado since 2000. We document that higher standards of governance result in significantly higher abnormal stock returns in the long run, controlling for firm and time fixed effects. The positive impact increased after the Global Financial Crisis, market microstructure has improved, and the market impact is stronger for financially healthy firms. Evidence suggests that committing to higher standards of corporate governance paid off for Brazilian firms in the long run.

Article Details

Section
Long Paper
Author Biographies

Luiz Moura, Getulio Vargas Foundation

Brazilian School of Public and Business Administration, PhD student in Finance

Lars Norden, Getulio Vargas Foundation

Brazilian School of Public and Business Administration, Professor of Banking and Finance