Title: Is the quality of corporate governance associated with the market risk for Brazilian energy companies?

Authors: Valdir de Jesus Lameira, Jean E. Harris, Osvaldo Luiz Goncalves Quelhas, Roberto Guimaraes Pereira

Addresses: INESC Coimbra, Rua Antero de Quental, 199, 3000-033, Coimbra, Portugal. ' School of Business Administration, Capital College, The Pennsylvania State University, 777 West Harrisburg Pike, Middletown, Pennsylvania 17057, USA. ' MSG/'LATEC, Federal Fluminense University, Rua Passo da Patria 156, Sala 329-A – Bloco E CEP 24210-240, Niteroi – RJ, Brazil. ' TEM/'PGMEC/'MSG, Federal Fluminense University, Rua Passo da Patria 156, CEP 24210-240, Niteroi – RJ, Brazil

Abstract: This study estimated the quality of governance practiced by a significant sample of Brazilian publicly traded companies and a sub sample of Brazilian energy companies, between 2002 and 2006, and related it to risk. An index composed of 20 questions, with all answers in binary form, was constructed to measure the quality of governance. The results obtained through the application of the method of simple and multiple linear regressions, were confirmed, with robustness, by the results obtained by the use of structural equations, confirming the original hypotheses. The effects of possible endogeneity do not harm the results obtained using the linear regressions. In this initial approach it seems that governance is relevant for the sample and sub sample of energy companies, though we did not observe significant statistical results for the sub sample of energy companies.

Keywords: corporate governance; market risk; Brazil; public companies; energy companies; capital markets; volatility; cost of capital; idiosyncratic risk; beta; linear regressions; structural equations; endogeneity.

DOI: 10.1504/IJIIM.2011.041748

International Journal of Intercultural Information Management, 2011 Vol.2 No.4, pp.276 - 300

Published online: 02 Aug 2011 *

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