WHY NOT MIGRATE? AN ANALYSIS OF LOWER CORPORATE GOVERNANCE SEGMENT COMPANIES THAT ALREADY OBEY THE ONE SHARE ONE VOTE PRINCIPLE
Name: LEONARDO CARVALHO SELLA
Publication date: 21/12/2020
Advisor:
Name |
Role |
|---|---|
| PATRÍCIA MARIA BORTOLON | Advisor * |
Examining board:
| Name |
Role |
|---|---|
| PATRÍCIA MARIA BORTOLON | Advisor * |
| VAGNER ANTONIO MARQUES | Internal Examiner * |
Summary: In the Brazilian open market, [B] ³ separates companies into corporate governance segments, demanding different requirements for listing in each of them. Among these segments, Novo Mercado is the one with the highest governance standards and the most stringent requirements for listing. In this segment, there is the requirement that the company should exclusively have
voting shares, which can be considered one of the most costly, since it directly impacts the ownership structure. Since the literature finds several benefits of listing in the Novo Mercado segment, it is expected that once the company fulfills this prerequisite, the natural path will be the migration to the Novo Mercado. However, there are companies that already obey this rule,
and yet choose to remain in the lower segments of corporate governance. Therefore, the objective of this research is to understand the motivation behind this decision by this group of companies. The research observed that in 2018 there was 18 companies in the lower segment that already had only voting shares, which made up the study interest group. To perform the
analysis, the study selected Novo Mercado companies that have similar characteristics to be used as control group comparable. Two methods were used to select this companies, the Propensity Score Matching and a manual selection of companies. The characteristics analyzed to make the inferences were some other rules for the Novo Mercado listing, characteristics of
the ownership structure, pyramidal structures and shareholder agreements, in addition to analyzing companies by the Corporate Governance Practices Index (IPGC). The study's findings indicate that other rules may be relevant in the decision to stay in the lower segment, in particular the need to offer 100% tag along and the minimum required of free float. It was also found that there is a negative relationship between the listing and the concentration of ownership and that pyramidal structures are more frequently used to take control in the lower segments. Furthermore, the IPGC analysis showed that even though having with only voting shares, the companies in the lower segments still have lower corporate governance standards in comparison to those in Novo Mercado. With this, we sought to contribute to the literature about the governance segments in Brazil, as well as to provide relevant information to market participants and regulators of [B] ³.
