The effect of capital ownership on the relationship between the regulatory process and companies’ abnormal return

ID: 76052

Authors: Maria Audenôra Rufino, Paulo Roberto Nóbrega Cavalcante.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Keyword: abnormal return , capital ownership , tariff change

Document type: Article (Portuguese) Show Abstract

The aim of this article was to examine the effect of tariff changes, moderated by capital ownership, on the abnormal return of Brazilian public utility companies. Based on the capture perspective, regulation can be captured by the regulated party, and capital ownership can shape the pressure from companies on the regulator for regulatory decisions that are favorable to their interests. This issue has not yet been investigated. In the regulatory process, the regulator’s decisions generally involve increasing the administered price. As a result, the legitimacy of the regulator is questioned, suggesting that its decisions are biased towards the interests of companies. This study sheds light on this issue. The evidence shows how the private identity of the controlling owner can lead the company to earn a return above the cost of capital through the regulatory process. The sample consisted of regulated companies (from the water and sanitation, piped natural gas and electricity sectors) from 2007 to 2019. The variables used were: abnormal return (dependent); tariff change and capital ownership (independent); and leverage, economic growth, size and sector. The data were estimated using a random effects model, generalized least squares and robustness using a dynamic panel with GMM-SYS (all observations). The results show that the private identity of the owner of the capital can lead to regulatory decisions that are more aligned with the interests of maximizing the profitability of the regulated companies. The results are consistent with the perspective of the economic rationality of private investors to maximize returns and the perspective that public investors prioritize other outcomes rather than abnormal returns.

On the edge: The impacts of cash flow at risk on the shareholders’ equity of public companies in Brazil

ID: 75729

Authors: Bruno Meirelles Salotti, João Vinícius de França Carvalho.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Keyword: capital requirement , cash flow at risk , insolvency risk , probability of failure

Document type: Article (Portuguese) Show Abstract

The objective of this article was to measure the cash flow at risk (CFaR) of non-financial companies in the Brazilian capital market and compare it to shareholders’ equity in order to assess the risk of insolvency. Unlike banks and insurance companies, which have strong capital requirements, the current regulation of non-financial institutions in Brazil does not provide for the calculation or maintenance of a minimum shareholders’ equity. This study fills a gap in the literature by relating CFaR to the shareholders’ equity of entities, providing a measure of insolvency risk. Monitoring insolvency risk (i.e., the possibility of negative shareholders’ equity) is critical for any entity, regardless of its industry, market, or size. The results of the CFaR measurement show that companies in different sectors can be exposed to insufficient resources in the event of operational problems. It is hoped that this will help regulators in different sectors to assess minimum capital requirements. CFaR was measured using Ebit and Ebitda (quarterly and annual). The panel consisted of 186 companies listed on the B³ between 2010 and 2022, totaling 4,897 company-quarters. The companies were divided into eight subgroups based on their characteristics. The results showed that non-financial listed companies in the Brazilian market may be undercapitalized, as 18% of the 169 entities that currently have positive shareholders’ equity would become negative at a 1% risk level. CFaRs were also reestimated during the pandemic and did not show a clear pattern compared to other periods.

The influences of institutional actors on the adoption of accounting standards for the public sector in Portugal

ID: 75728

Authors: Rui Manuel da Costa Robalo, Ana Rita Ribeiro de Matos.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Keyword: accounting standardization , institutional theory , IPSAS , Portugal , public sector

Document type: Article (Portuguese) Show Abstract

This study analyzes how different institutional actors influenced the adoption of accounting standards based on the IPSAS in Portugal. There is a need to understand how social structures of signification, legitimation, and domination are activated by different institutional actors in the process of adopting accounting standards, articularly in a context of financial crisis. The study of the Portuguese case is particularly relevant due to the fact that the process of adopting new accounting standards based on the IPSAS took place in the context of a financial crisis related to the sovereign debt problem. Knowledge of the process of adopting accounting standards based on the IPSAS in Portugal can be useful for current and future agents of accounting changes in other countries. This research adopted a retrospective case study methodology, supported by documentary sources and semistructured interviews as data collection and evidence generation methods. The main contribution of this study is to show the relevance of the balanced use of different social structures (signification, legitimation, and domination) in accounting change processes, as well as to show the strengthening of the power of institutional actors at the economic and political level vis-à-vis other institutional actors in contexts of financial crisis.

Strategies for legitimizing negative events: Mining dam collapse and disclosure

ID: 75727

Authors: Fernando Amorim, Maria Tereza Saraiva de Souza.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Keyword: environmental disclosure , legitimation strategies , negative events

Document type: Article (Portuguese) Show Abstract

This research aimed to analyze the legitimation strategies used in environmental disclosure to neutralize negative events, such as environmental accidents, and to help identify and conceptualize the legitimation strategies related to negative events and environmental accidents used in sustainability reports. The article questions the reliability of sustainability reports produced by a benchmark company in a polluting and impact-generating sector, finding that they can be strategically manipulated to serve the interests of legitimizing and repairing the company’s image rather than providing clear and objective information. The article examines the image repair mechanisms used by Samarco Mineração in its sustainability reports following the Mariana environmental disaster, with the aim of legitimizing one of the largest mining companies in the country at the time of the accident, the consequences of which are still being felt years after its occurrence. The research adopted the interpretivist paradigm, with a qualitative approach and textual content analysis of sustainability reports and reports from the relevant government agency, using the documentary research technique. It was found that the environmental disclosure published in sustainability reports is rhetorically manipulated with a massive amount of positive information, which overshadows and diverts the reader’s attention from negative information and neutralizes it with defensive and mitigating arguments, thus showing that its content is not committed to the impartial disclosure of information.

Influence of the sponsor’s financial situation on the allocation of pension plan assets

ID: 75726

Authors: Sheila Sayuri Kataoka, Charles Ulises de Montreuil Carmona.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Keyword: asset allocation , closed pension funds , defined benefit plan , financial situation , risk management

Document type: Article (Portuguese) Show Abstract

The objective was to investigate the factors related to the financial situation of sponsors that can be associated with the decision to allocate the assets of the defined benefit plans of Brazilian closed supplementary pension entities in the annual period from 2013 to 2019. Previous research has studied the sponsor’s financial situation and the allocation of resources by segment type, but there is a gap in relation to portfolio composition in pension plans where there is no compulsory adherence to insurance. The relevance of this research lies in identifying the factors related to the sponsor’s financial situation that may be associated with the resources allocation decision in order to understand what may jeopardize the future payment of benefits. This research contributes to the discussion on the relationship between the portfolio of pension plans and the financial situation of the sponsor; and, indirectly, to the debate on issues related to withdrawal of sponsorship, migration between defined benefit and defined contribution plans, and the acquisition of insurance to cover the payment of future benefits. A total of 134 benefit plans and their respective sponsors were analyzed over a seven-year period. Allocation was divided into decision categories according to portfolio composition, and the statistical technique of multinomial logistic regression was used to analyze the data. The results show that the level of funding, the degree of solvency, the size of the company and financial leverage, as well as factors such as past profitability, financial maturity and actuarial solvency, are aspects of the sponsor’s financial situation that may influence the allocation decision and contribute to the advancement of research on the relationship between pension fund portfolio composition and the sponsor’s financial situation.

Economic policy uncertainty, sentiment and Brazilian stock market performance

ID: 75725

Authors: Wanderci Alves Bitencourt, Robert Aldo Iquiapaza.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Keyword: asymmetric effects , economic policy uncertainty , investor sentiment , market performance , NARDL

Document type: Article (Portuguese) Show Abstract

The aim of this article was to investigate the causal relationships between economic policy uncertainty, investor sentiment, and the performance of the Brazilian market, while taking into account the presence of asymmetries and both short- and long-term cointegration. In market dynamics, it is expected that economic policy uncertainty, investor sentiment, and market performance will show some degree of relationship. In the Brazilian context, the analysis of these three variables has not been carried out, especially considering their assymmetric interrelations and the behavior of the relationships in the short and long term simultaneously. Understanding these relationships is important because it allows agents to know the potential impacts that these variables have on each other, which will facilitate informed decision-making among the involved parties. The results obtained are relevant for investment strategies, as informed investors will direct their decisions towards minimizing their exposure to market fluctuation, based on identified causal relationships and anticipating potential market movements. Utilizing a nonlinear autoregressive distributed lag model, the study showed that the relationships between investor sentiment, economic policy uncertainty, and stock market performance are more complex than suggested by previous studies applied to the Brazilian market. We identified asymmetric short- and long-term relationships not previously observed.

The effect of media coverage on earnings management: Evidence from Brazilian companies

ID: 75724

Authors: Gabriela de Abreu Passos, Rodrigo de Souza Gonçalves.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Keyword: Brazilian companies , earnings management , media

Document type: Article (Portuguese) Show Abstract

This study aims to verify the effect of media coverage on the earnings management of Brazilian listed companies. A sample of 284 Brazilian non-financial companies listed on the B3 was used, with quarterly data for the period 2011-2022. Media coverage was measured by the natural logarithm of the number of news stories released about the firms, and for earnings management, a detection model with accruals was used (Collins et al., 2017), estimated using an unbalanced panel in GMM 2SLS. The results show a negative association between media coverage and earnings management, indicating that managers tend to manage earnings less in the presence of media visibility, in order to avoid negative effects on the deviation from the real value of earnings. The research reveals that the Brazilian media acts as an external agent of governance, inducing the improvement of accounting information by monitoring management actions. Given the importance of the role played by the media, especially through the rapid dissemination of information, the results show that media coverage contributes to reducing the noise generated by earnings management. This finding could have implications for managers and the capital market, as it shows that the media is an agent that interferes, albeit indirectly, with corporate actions. Therefore, the media influences various organizations, with implications for management practices that seek to improve transparency. The study seeks to fill a gap regarding the effect of Brazilian media coverage on earnings management, shedding light on the media as an external element of corporate governance that contributes to an environment of better accounting information.

Editorial: The problem of finding a problem to call your own

ID: 75723

Authors: Fábio Frezatti.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 0-0, January-April, 2024. 1 page(s).

Document type: Editorial (Portuguese)

The influence of CEO narcissistic personality traits on the indebtedness of B3 companies

ID: 75633

Authors: Ana Paula da Silva de Oliveira1, Inajá Allane Santos Garcia.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 1-15, January-April, 2024. 15 page(s).

Keyword: CEO characteristics , indebtedness , narcissism , upper echelons theory

Document type: Article (Portuguese) Show Abstract

The objective of this article is to investigate the influence of CEO narcissistic personality traits on the indebtedness of Brazilian non-financial companies listed on the B3. Other research on narcissistic traits has focused on their impact on the profitability of organizations. Thus, this study aims to fill the gap in understanding the impact of CEO narcissistic traits on companies' debt decisions and their determinants by including a psychological characteristic. This research is relevant because it helps academics, business professionals and policymakers to identify patterns and trends that could warn of possible financial crises. The impact of this article is related to the evidence on the effects of hiring narcissistic CEOs on indebtedness, since understanding the interaction between the CEO's profile and the company's financial decisions can provide practical guidelines for risk management and informed decision making, thus contributing to the field of business strategy and corporate finance. A sample of 299 non-financial companies was analyzed from 2011 to 2020, using data from the Economática database, annual reports, integrated reports, sustainability reports and management reports. Two proxies were used to measure narcissistic personality traits, based on the CEO's signature and the prominence of his or her photo. Indebtedness was measured by the following indicators: onerous, total, short-term and long-term debt. The results show that the greater the narcissistic traits of the CEOs, the greater the indebtedness of the organizations. This contributes to a deeper understanding of the factors that influence companies' financial decisions, since identifying the factors that lead to risky debt decisions can enable the implementation of preventive measures and more effective risk management strategies.

ESG disclosure and pay-performance sensitivity

ID: 75632

Authors: Jonas Adriel dos Santos Grodt, Larissa Degenhart, Cristian Baú Dal Magro, Lucas Veiga Ávila, Yvelise Giacomello Piccinin.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 1-18, January-April, 2024. 18 page(s).

Keyword: ESG , executive pay , pay-performance sensitivity , performance

Document type: Article (Portuguese) Show Abstract

This research aims to investigate the moderating effect of environmental, social and governance (ESG) disclosure on the sensitivity of executive pay to market performance (pay-performance sensitivity - PPS) in Brazilian companies listed in the B3 IBrX-100 index. It also investigates the factors that influence PPS in order to seek explanations for the effect of ESG disclosure on PPS and to identify which theoretical perspective (agency theory, stakeholder theory, or the good governance view) can support the results found for Brazilian companies. It highlights the importance of monitoring ESG disclosure in the Brazilian capital market, as well as helping to understand whether or not ESG disclosure contributes to the extraction of shareholder income by executives, and provides insights for new research to be conducted considering ESG disclosure. The results have implications for understanding the principal-agent relationship and for understanding ESG disclosure in conflict mitigation when used by companies to improve PPS. A total of 81 companies were analyzed between 2016 and 2021. The method used for the main analyses was the ordinary least squares regression model (with robust standard errors), while quantile regression was used for the robustness analysis. The results indicate that ESG disclosure maximizes the sensitivity of executive pay to market performance. This study contributes to the literature by providing new evidence on PPS and identifying which theoretical perspective supports the results found in the Brazilian context. It also contributes to organizations by showing that ESG investments can mitigate agency problems and by revealing the importance of ESG implementation for firms, given the evidence of a positive impact on PPS. It contributes to society by encouraging organizations to invest in ESG issues.

Financial slack and environmental expenditures: Value relevance in the Brazilian stock market

ID: 75631

Authors: José Glauber Cavalcante dos Santos, Alessandra Carvalho de Vasconcelos, Márcia Martins Mendes De Luca.

Source: Revista Contabilidade & Finanças, v. 35, n. 94, p. 1-19, January-April, 2024. 19 page(s).

Keyword: emerging markets , environmental expenditures , financial slack , informational relevance

Document type: Article (Portuguese) Show Abstract

The objective of this article is to evaluate the effect of financial slack on the value relevance of environmental expenditures in Brazilian capital market firms. The Brazilian literature, unlike the foreign literature, has neglected to investigate the value relevance of environmental performance information. The study addresses the combination of environmental information with the financial condition of firms within the scope of value relevance, obtaining evidence not yet contemplated in the literature on the Brazilian capital market. It is noteworthy that the financial perspective strongly influences the valuation of firms in terms of the environmental dimension. Companies that engage in environmental spending and are in a better financial position are better valued and considered economically interesting. The same is not true for firms in a worse financial position. The study shows how the environmental dimension, which is not a priority from the shareholder's point of view, can be the object of investor attention if the financial condition requirement is met. The market monitors environmental expenditures in order to assess much more the extent of the effects of these expenditures on the generation of future cash flows rather than the company's environmental commitment. The sample includes 52 companies whose shares were traded on the B3 S.A. in the period 2009-2018, totaling 252 observations. The model proposed by Ohlson was used, adapted according to the literature, and operationalized in POLS models. In addition, analyses were reproduced considering the possible moderating effect of financial slack measures on the environmental spending proxy. The results indicate that environmental spending contributes to reducing the valuation of firms, signaling to investors only future economic costs. Financial slack was found to be an important element in the valuation of firms with environmental expenditures, and companies with environmental expenditures and greater financial slack had higher valuations than those with less financial slack.