Keywords: business governance, risk management, publicly traded companies, linear regressions, structural equations, Brazil, share price volatility, idiosyncratic risk, capital weighted average cost, risk variables
Governance and risk of Brazilian publicly traded companies
This study estimates the relations between the governance practiced by a significant sample of Brazilian publicly listed companies and the risk of them. Local beta, the beta obtained using the S&P 500, share price volatility, idiosyncratic risk and the weighted average cost of capital were used to express their risk. The study confirmed that better governance were associated with lower risk. The structural equations results confirmed the linear regressions results. The endogeneity observed did not invalidate the results. The evidence predominately showed that the direction of causality runs from governance to the risk variables and not vice-versa.