Keywords
corporate governance
capital markets
event study
How to Cite
Abstract
Purpose – This study examines how the Brazilian stock market reacts to pivotal events related to the State-Owned Enterprises Law, including both governance-enhancing milestones and regulatory relaxations. It investigates whether ownership structure, governance levels, and listing segments influence investor responses.
Theoretical framework – Rooted in agency theory, the study explores how principal-agent conflicts, particularly in politically influenced state-owned enterprises, can affect firm performance and market behavior. The State-Owned Enterprises Law aimed to mitigate such inefficiencies through governance reforms.
Design/methodology/approach – We apply an event study methodology and difference-in-differences (DID) techniques to analyze the abnormal stock returns of 107 B3-listed companies during four pivotal events related to the State-Owned Enterprises Law, encompassing both its enactment and its subsequent weakening.
Findings – The results reveal positive cumulative abnormal returns (CARs) following governance-enhancing events, suggesting market confidence in improved oversight and reduced political interference. Conversely, events signaling a rollback of the law’s provisions, particularly the day the Chamber of Deputies approved the 2022 bill easing board appointment criteria, generated negative CARs, indicating concerns over transparency and governance quality.
Practical and social implications of the research – The findings highlight the sensitivity of asset prices to governance regulations in emerging markets. They reinforce the importance of institutional safeguards in reducing agency conflicts and protecting investor interests in state-owned enterprises.
Originality/value – This study contributes to the limited empirical literature on how Brazilian capital markets interpret corporate governance reforms. It offers new evidence on the roles of regulation, ownership structure, and governance quality in shaping market dynamics.
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