Related-parties transactions: determinants and impacts on firms performance
Name: JOÃO ANTÔNIO SALVADOR DE SOUZA
Publication date: 28/11/2014
Advisor:
Name |
Role |
|---|---|
| PATRÍCIA MARIA BORTOLON | Advisor * |
Examining board:
| Name |
Role |
|---|---|
| MARCELO ALVARO DA SILVA MACEDO | Internal Examiner * |
| PATRÍCIA MARIA BORTOLON | Advisor * |
Summary: The international literature that examines the factors impacting related parties transactions
focuses on the UK, US and Asia, and Brazil is an environment little investigated. This
research aims to investigate both the impacting factors of contracts with related parties, and
the impact of these transactions on the performance of Brazilian companies. Studies recent
that investigated the determinants of related parties transactions (RPTs), as well as its impact
on business performance, took into account the aspects presented by Gordon, Henry and Palia
(2004): (a) conflict of interests, which support the view that the RPTs are harmful to minority
shareholders, implying expropriation of their wealth by controlling (majority shareholders);
and (b) efficient transactions that may be beneficial to companies, serving thus to economic
objectives. This research draws on aspects of conflict of interest, based on agency theory and
the fact that the Brazilian scenario is characterized by concentrated ownership and a legal
environment characterized by poor protection of minority shareholders. To operationalize the
research, we used an initial sample consisted of 70 companies listed on the BM&FBovespa
observing the period from 2010 to 2012. The contracts listed were identified and quantified in
two ways, according to the methodology applied by Kohlbeck and Mayhew (2004; 2010) and
Silveira, Prado and Sasso (2009). As major determinants were investigated proxies to capture
the effects of corporate governance mechanisms and legal environment of business
performance, the control rights and cash flow rights mismatch and excessive executive
compensation. Control variables to isolate the intrinsic characteristics of the firms were also
added. In the econometric analysis Poisson models, clustered cross section (Pooled-OLS) and
logit models were estimated. The estimation was done by the method of ordinary least squares
(OLS), and to increase the robustness of the econometric estimates, instrumental variables
with generalized method of moments (GMM) were used. Evidence indicates that investigated
factors impact differently the various RPT measures of the companies analyzed. It was found
that the contracts, in general, are damaging to companies, negatively impacting their
performance, and this performance is increased by the presence of effective corporate
governance. The results of the impact of corporate governance measures and the intrinsic
characteristics of the firms in business performance are robust to the presence of endogeneity
based on regressions with instrumental variables.
