Board Interlocking and Accounting Choices in Brazilian Electric Energy Companies with Stock Exchange

Ribeiro, Flávio; Clemente, Ademir

doi:10.15728/bbr.2023.20.1.3.en

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Article • BBR, Braz. Bus. Rev. 20 (1) • Jan-Feb 2023 • https://doi.org/10.15728/bbr.2023.20.1.3.en copy

Board Interlocking and Accounting Choices in Brazilian Electric Energy Companies with Stock Exchange

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

This article aims to analyze the influence of stability and the intensity of board interlocking on accounting choices. The sample consists of 57 companies in the electricity sector out of a total of 59 with shares traded on Brasil, Bolsa, Balcão (B3), analyzed in a a period ranging from 2010 to 2016. This resulted in 177 different connections between companies. Company stability and intensity of existing relationships between the boards were used as proxies for an interlocking framework. For determining the accounting choice, an attempt was made to identify similarities between the choices adopted by the companies. The findings reveal considerable changes in the connection structures of companies. This began with the formation of a major network in the years 2010 and 2011, and ended with five well-defined groups in 2016. The results suggest that stability and intensity of connections favor dissemination of accounting choices. This is especially true for choices related to measurement and classification. These findings converge with Connelly and Slyke (2012) according to whom the existence of common counselors favor the access and dissemination of information between companies.

Keywords:
Board Interlocking; Board Interlocking stability; Intensity of Board Interlocking; Accounting Choices; Electricity Sector

	Items	Values	Source*
Measurement Accounting Choices	PPI (Investment property)	Historical cost (1)	CPC 28
	PPI (Investment property)	Fair value (0)	CPC 28
	Customers/Suppliers - adjustment to present value - Short Term	Yes (1)	CPC 12
		No (0)	CPC 12
	Inventories	PEPS (1)	CPC 16
	Inventories	Average cost (0)	CPC 16
Recognition accounting choices	Depreciation	Linear only (1)	CPC 27
	Depreciation	Others (0)	CPC 27
	Amortization - Intangible (defined useful life)	Linear only (1)	CPC 04
	Amortization - Intangible (defined useful life)	Others (0)	CPC 04
	Financial Instrument	Result (1)	CPC 38, 39, 40
	Financial Instrument	PL (0)	CPC 38, 39, 40
Classification accounting choices	Interest Paid	Operating CF (1)	CPC 03
	Interest Paid	Financial CF (0)	CPC 03
	Dividends and Interest on Equity Paid	Operating CF (1)	CPC 03
	Dividends and Interest on Equity Paid	CF Financial (0)	CPC 03
	Interest received	Operating CF (1)	CPC 03
	Interest received	Investment CF (0)	CPC 03
	Dividends and Interest on Equity Received	Operating CF (1)	CPC 03
	Dividends and Interest on Equity Received	Investment CF (0)	CPC 03
Disclosure accounting choices	Operating Cash Flow	Direct method (1)	CPC 03
	Operating Cash Flow	Indirect method (0)	CPC 03
	Comprehensive Income Statement	Statement of changes in equity (1)	CPC 26
	Comprehensive Income Statement	Own report (0)	CPC 26
	Other Comprehensive Results	After taxes (1)	CPC 26
	Other Comprehensive Results	Before taxes (0)	CPC 26

Construct	Variable	Acronym	Classification	Operational definition	Measurement procedure
Accounting choices	Measurement	ECM	Dependent	Value obtained through the Accounting Choices Metric	Value 1 if the average of the scores in the period was greater than 0.50, and 0 otherwise.
	Recognition	ECR	Dependent
	Classification	ECC	Dependent
	Disclosure	ECE	Dependent
Board interlocking	Stability	ESTAB	Independent	Identifies the stability of connections	Ratio between the number of years with connections and the total
	Intensity	INTENS	Independent	Refers to the strength of connections	Average of connections during the period
	Stability and Intensity	ESTAB_INTENS	Independent	Multiplicative metric for association between stability and intensity	Multiplication of stability by intensity
Control variables	State-Owned	EP	Control	Indicates whether a company is State-owned	State-owned: 1; otherwise: 0
	Corporate governance	NGC	Control	Corporate governance	Corporate governance: 1; otherwise: 0
	ADRs	ADR	Control	Identifies whether a company issues ADRs	Yes: 1; No: 0

Variables	Minimum	Maximum	Average	SD	CV
INTENS	0.14	47.29	3.98	7.27	1.83
ESTAB	0.14	1.00	0.60	0.36	0.59
INTENS_ESTAB	0.02	47.29	3.71	7.34	1.98
ECM²	0.85	1.00	0.85	0.17	0.20
ECR²	0.78	1.00	0.78	0.18	0.23
ECC²	0.79	1.00	0.79	0.15	0.19
ECE²	0.84	1.00	0.84	0.13	0.15
ADR	0.00	1.00	0.30	0.46	1.53
NGC	0.00	1.00	0.64	0.48	0.75
EP	0.00	1.00	0.35	0.48	1.37

Variables	Model#1	Model#2	Model#3	Model#4	Model#5	Model#6
Independent
ESTAB	0.3144				1.610***
ESTAB	1.143				2.941
INTENS		0.020			0.005
		0.841			0.155
ESTAB_INTENS			0.020			0.060**
			0.839			2.251
Control
EP				-2.265***	-2.541***	-2.533***
EP				-4.144	-4.494	-4.188
ADR				-0.455	-0.183	-0.304
ADR				-0.846	-0.321	-0.547
NGC				0.541	-0.425	0.315
NGC				1.314	-0.845	0.738
Mean of dependent variable	0.500	0.500	0.500	0.500	0.500	0.500
Regression standard error	0.499	0.500	0.500	0.448	0.416	0.437

Variables	Model#1	Model#2	Model#3	Model#4	Model#5	Model#6
Independent
ESTAB	-0.143				-1.027**
ESTAB	-0.534				-2.136
INTENS		-0.008			0.022
INTENS		-0.392			0.730
ESTAB_INTENS			-0.009			-0.020
ESTAB_INTENS			-0.427			-0.876
Control
EP				-0.097	-0.019	-0.039
EP				-0.233	-0.044	-0.093
ADR				0.424	0.305	0.392
ADR				0.892	0.632	0.820
NGC				0.343	0.847*	0.390
NGC				0.938	1.957	1.050
Mean of dependent variable	0.500	0.500	0.500	0.500	0.500	0.500
Regression standard error	0.501	0.501	0.501	0.494	0.486	0.494

Variables	Model#1	Model#2	Model#3	Model#4	Model#5	Model#6
Independent
ESTAB	0.695**				1.471**
ESTAB	2.429				2.472
INTENS		0.133***			0.044
INTENS		2.725			0.760
ESTAB_INTENS			0.152***			0.186***
ESTAB_INTENS			2.816			3.041
Control
EP				-0.222	-0.406	-0.266
EP				-0.523	-0.904	-0.595
ADR				0.718	0.960*	0.826
ADR				1.451	1.848	1.632
NGC				-0.544	-1.377***	-0.804**
NGC				-1.441	-2.914	-2.015
Mean of dependent variable	0.500	0.500	0.500	0.500	0.500	0.500
Regression standard error	0.489	0.480	0.477	0.495	0.453	0.463

Variables	Model#1	Model#2	Model#3	Model#4	Model#5	Model#6
Independent
ESTAB	0.142				0.118
ESTAB	0.541				0.281
INTENS		0.015			0.012
INTENS		0.783			0.453
ESTAB_INTENS			0.016			0.012
ESTAB_INTENS			0.805			0.810
Control
EP				-0.045	-0.108	-0.105
EP				-0.114	-0.265	-0.260
ADR				-0.370	-0.327	-0.325
ADR				-0.807	-0.707	-0.704
NGC				0.169	0.078	0.125
NGC				0.457	0.193	0.334
Mean of dependent variable	0.500	0.500	0.500	0.500	0.500	0.500
Regression standard error	0.501	0.500	0.501	0.505	0.507	0.506

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