Corporate Attributes, Corporate Governance Quality, and the Value of Public Brazilian Companies

This paper investigates the influence of corporate governance quality on the market value of 154 Brazilian listed companies in 2002. As a proxy for corporate governance quality, a broad governance index was built. The empirical investigation employed different econometric approaches with increasing level of complexity, including multiple regressions by ordinary last squares, instrumental variables estimators and simultaneous equations systems. Results obtained with all econometric approaches show a positive and significant influence of corporate governance quality on firms market values. The paper also finds evidence of endogeneity of the corporate governance variable, for which different instruments are proposed. Moreover, results obtained with the simultaneous equations approach suggest that there might be a two-way causality link between corporate governance quality and firm valuation.