Subsidized debt, corporate governance, and ownership concentration of Brazilian firms

Sampaio, Thicia Stela Lima; Crisóstomo, Vicente Lima; Brandão, Isac de Freitas; Pinheiro, Bruno Goes

doi:10.7819/rbgn.v26i02.4266

Thicia Stela Lima Sampaio

definition of research problem

development of hypotheses or research questions (empirical studies)

definition of methodological procedures

data collection

literature review

statistical analysis

analysis and interpretation of data

critical revision of the manuscript

manuscript writing

Doutoranda, Universidade Federal do Ceará, Fortaleza, Brasil.

Universidade Federal do Ceará , Programa de Pós-Graduação em Administração e Controladoria, Fortaleza, CE, Brasil

https://orcid.org/0000-0001-7105-9825

Vicente Lima Crisóstomo

definition of research problem

development of hypotheses or research questions (empirical studies)

definition of methodological procedures

data collection

literature review

statistical analysis

analysis and interpretation of data

critical revision of the manuscript

manuscript writing

Doutor, Universidade Federal do Ceará, Fortaleza, Brasil.

Universidade Federal do Ceará , Programa de Pós-Graduação em Administração e Controladoria, Fortaleza, CE, Brasil

https://orcid.org/0000-0002-8593-0471

Isac de Freitas Brandão

definition of research problem

development of hypotheses or research questions (empirical studies)

definition of methodological procedures

statistical analysis

analysis and interpretation of data

critical revision of the manuscript

manuscript writing

Doutor, Instituto Federal de Educação, Ciência e Tecnologia do Ceará, Baturité, Brasil.

Instituto Federal de Educação, Ciência e Tecnologia do Ceará, Departamento de Educação, Baturité, CE, Brasil

https://orcid.org/0000-0002-4928-8637

Bruno Goes Pinheiro

definition of research problem

development of hypotheses or research questions (empirical studies)

definition of methodological procedures

data collection

statistical analysis

analysis and interpretation of data

critical revision of the manuscript

manuscript writing

Doutorando, Universidade Federal do Ceará, Fortaleza, Brasil.

Universidade Federal do Ceará , Programa de Pós-Graduação em Administração e Controladoria, Fortaleza, CE, Brasil

https://orcid.org/0000-0003-2103-9660

Responsible editor:

Prof. Dr. Wlamir Xavier

Reviewers:

Daniel Ferreira Caixe; Joséte Florencio dos Santos

Conflicts of interest:

The authors have no conflict of interest to declare

E-mail: thiciasampaio@gmail.com

E-mail: vlc@ufc.br

E-mail: isac.f.brandao@gmail.com

E-mail: brunogoesp@gmail.com

Dimension	Practice	Operationalizing the practice
Share rights and circulation	p1	Ordinary shares / total shares
	p2	(i) Companies with ordinary shares only: full (1.0); restricted (0.5); no rights (0.0); (ii) Companies with ordinary and preference shares: average score for each class of share; (iii) Companies with ordinary shares only: tag along of ordinary shares.
	3 subpractices
	p3	Companies with both ordinary and preference shares: average tag along for each class of share
	p4	Free float. Outstanding shares / total shares
Ordinary general meeting	p5	Mechanisms for including shareholder proposals on the agenda: Yes (0.25); No (0.00)
	p5	Online transmission of the ordinary general meeting: Yes (0.25); No (0.00)
	4 subpractices
		Minimum notice period of 30 days for the ordinary general meeting: Yes (0.25); No (0.00)
		Provision of means of communication between the company and shareholders on the agenda of the ordinary general meeting via the internet: Yes (0.25); No (0.00)
Board of Directors	p6	Tenure of the Board of Directors (BoD): Up to 2 years (1.00); More than 2 years (0.00)
	p7	The Board of Directors does not receive part of its remuneration linked to short-term objectives: Yes (1.00); No (0.00)
	p8	Existence of an audit and/or remuneration and/or governance and/or similar committee: Yes (1.00); No (0.00)
	p9	Are there formal mechanisms for evaluating the BoD and/or its members? Yes (1.00); No (0.00)
	p10	Does the BoD consist of 5 to 11 effective members? Yes (1.00); No (0.00)
Board composition	p11	No. of outside board members / total board members
	p12	No. of independent board members / total board members
	p13	Separation of the roles of Chairman and CEO: Yes (1); No (0)
	p14	No. of minority board members / total board members
	p15	No. of women on the board / total board members
	p16	The board member has no substitute members: Yes (1); No (0)
Executive Board	p17	Tenure of the Executive Board: Up to 2 years (1.00); More than 2 years (0.00)
	p18	The Executive Board receives part of its remuneration linked to the company's results: Yes (1); No (0)
	p19	The Executive Board receives part of its remuneration based on shares: Yes (1); No (0)
	p20	There are formal mechanisms for evaluating the Executive Board and/or its members: Yes (1); No (0)
	p21	No. of women on the Executive Board / total executive directors
Supervision	p22	Supervisory board in place: Yes (1); No (0)
	p23	No. of minority members / total members on the supervisory board
	p24	Audit committee in place: Yes (1); No (0)
	p25	No. of independent members / total members on the audit committee
Transparency	p26	The company has a code of conduct and publishes it: Yes (0.20); No (0.00)
		The company discloses relevant factors: Yes (0.20); No (0.00)
		The company discloses information on related parties: Yes (0.20); No (0.00)
	5 subpractices
		The company has a share trading policy and discloses it: Yes (0.20); No (0.00)
		The company has a risk management policy and discloses it: Yes (0.20); No (0.00)
	p27	The company publishes a sustainability report or similar on its website: Yes (0.50); No (0.00)
	3 subpractices	The company discloses non-accounting performance indicators: Yes (0.25); No (0.00)
	3 subpractices	The company discloses forecasts of its future performance: Yes (0.25); No (0.00)
	p28	The company's articles of association include an arbitration clause to resolve disputes between shareholders and between shareholders and the issuer: Yes (1.00); No (0.00)

Variable name	Operationalization	Source
SUBDEBT	$(\frac{{Subsidized Debt Acquired}_{i, t}}{{Total Assets}_{i, t}})$	BNDES
SUBCAP	Dummy: 1 if it acquired subsidized debt during the year; 0 if it did not acquire subsidized debt during the year	BNDES
IQGC	Index indicating the quality of corporate governance. The value ranges from 0 to 1 (28 practices, 7 dimensions).	RF sent to the CVM
NM	Dummy: 1 if it participates in the NM; 0 if it does not participate in the NM	Economática®
$OwnCon$	Total votes held by the main shareholder (from the 1st largest (“OwnCon1”) to the 5 largest (“OwnCon5”)
${OwnCon}^{2}$	Square of the total votes held by the main (1st to 5th largest) shareholders
Exvot	$V o t i n g r i g h t s o f t h e m a i n s h a r e h o l d e r_{i, t} - M a i n s h a r e h o l d e r' s r i g h t s t o c a s h f l o w_{i, t}$
ROE	$\frac{Net Income}{{Net Equity}_{i, t}}$
Tang	$\frac{{Fixed Assets}_{i, t}}{{Total Assets}_{i, t}}$
Size	Natural logarithm of the firm's total assets

Sector	No. obs.	%	No. firms	Av. subs. debt	N allocations	% allocations
Food, beverages, agribusiness, and fishing	100	7.21	11	0.0262	18	12.00
Paper, cellulose, wood, chemicals, oil, and gas	126	9.08	13	0.0559	37	24.67
Mining and non-metallic minerals	37	2.67	4	0.0082	4	2.67
Electronics, software, and data	66	4.76	7	0.0275	4	2.67
Steel and metallurgy	86	6.20	9	0.0250	12	8.00
Textiles	69	4.97	7	0.0072	5	3.33
Construction	129	9.30	14	0.0000	0	0.00
Energy	157	11.32	16	0.0092	7	4.67
Telecommunications	27	1.95	3	0.0194	3	2.00
Transportation services	110	7.93	12	0.0108	8	5.33
Vehicles and industrial machinery	86	6.20	9	0.0058	8	5.33
Commerce	122	8.80	13	0.0468	22	14.67
Water, sewage, and other systems	30	2.16	3	0.0704	14	9.33
Other services	197	14.20	21	0.0015	3	2.00
Other industries	45	3.24	5	0.0210	5	3.33
	1387		147		150	100.00

Year	No. credit allocations	Annual variation in no. allocations	Amount allocated&	Annual variation in amount allocated
2010	20	-	14,120,915.95	-
2011	21	5.00%	21,618,790.49	53.10%
2012	25	19.05%	54,338,378.99	150.935%
2013	24	-4.00%	27,658,907.11	-49.01%
2014	21	-12.50%	41,573,688.41	50.31%
2015	18	-14.29%	15,530,347.49	-62.64%
2016	5	-72.22%	9,789,403.42	-36.97%
2017	7	40.00%	4,695,099.57	-52.04%
2018	6	-14.29%	14,001,963.18	198.23%
2019	3	-50.00%	22,996,262.42	64.24%
Total	150		226,233,460.85
Mean	15.00		22,623,346.09
St. Dev.	8.67		15,161,379.37
Coef. Var.	0.58		0.67

Variable	Mean	Median	SD	CV	Min	Max
SUBDEBT	0.0196	0.0000	0.0767	3.9155	0.0000	0.5265
IQGC	0.6049	0.6026	0.1015	0.1678	0.0000	0.8810
OwnCon1	0.4178	0.4029	0.2310	0.5530	0.0014	1.0000
OwnCon 2	0.5426	0.5470	0.2314	0.4265	0.0014	1.0000
OwnCon 3	0.5992	0.6088	0.2210	0.3689	0.0014	1.0000
OwnCon 4	0.6309	0.6408	0.2122	0.3364	0.0014	1.0000
OwnCon 5	0.6481	0.6610	0.2030	0.3178	0.0014	1.0000
Exvot	0.0684	0.0000	0.1424	2.0811	-0.0506	0.6498
ROE	0.0762	0.0901	0.1585	2.0800	-0.3494	0.3478
Tang	0.1252	0.0340	0.1674	1.3366	0.0000	0.6900
Size	14.2385	14.1005	1.4573	0.1024	9.3085	19.4508

	Panel A														Panel B
	(1)		(2)		(3)		(4)		(5)		(6)		(7)		(1)		(2)		(3)		(4)		(5)		(6)		(7)
IQGC	-0.022		-0.023		-0.022		-0.024		-0.024		-0.017		-0.014
NM dummy															-0.007		-0.007		-0.006		-0.007		-0.007		-0.003		-0.003
Exvot											0.040	**	0.035	*											0.037	*	0.032
OC1	-0.058	*											0.005		-0.057	*											0.007
OC1_2	0.077	**													0.074	**
OC2			-0.094	**													-0.089	**
OC2_2			0.093	***													0.087	**
OC3					-0.107	**													-0.101	**
OC3_2					0.098	***													0.091	**
OC4							-0.108	**													-0.099	**
OC4_2							0.094	**													0.085	**
OC5									-0.095	*													-0.084	*		*
OC5_2									0.082	**													0.071	*		*
ROE	-0.005		-0.004		-0.004		-0.004		-0.004		-0.005		-0.005		-0.006		-0.005		-0.005		-0.005		-0.005		-0.005		-0.005
Tang	0.032	**	0.032	**	0.033	**	0.034	***	0.035	***	0.032	**	0.032	**	0.031	**	0.031	**	0.032	**	0.033	**	0.034	***	0.032	**	0.032	**
Size	0.003	^* * indicates significance at 10%; indicates significance at 5%; * indicates significance at 1%. Note: Models with year and sector dummy variables. Feasible generalized least squares (FGLS) estimates that are robust to heteroskedasticity.	0.003		0.002		0.002		0.003		0.002		0.002		0.002		0.002		0.002		0.002		0.002		0.002		0.002
Const.	-0.005		0.014		0.020		0.024		0.019		-0.006		-0.011		0.001		0.017		0.023		0.025		0.021		-0.007		-0.012
No. obs.	1.387		1.387		1.387		1.387		1.387		1.387		1.387		1.387		1.387		1.387		1.387		1.387		1.387		1.387
No. firms	147		147		147		147		147		147		147		147		147		147		147		147		147		147
chi2	140.2	***	140.6	***	140.5	***	138.9	***	137.1	***	137.98	***	138.2	***	141.2	***	141.1	***	140.8	***	139.2	***	137.4	***	138.1	***	138.1	***
Utest (t)	1.73	**	2.41	***	2.46	***	2.3	**	1.94	**		**			1.72	**	2.31	**	2.32	**	2.03	**	1.65	**		**
Extreme point	0.379		0.504		0.545		0.573		0.576						0.386		0.512		0.552		0.583		0.587

	Panel A														Panel B
	(1)		(2)		(3)		(4)		(5)		(6)		(7)		(1)		(2)		(3)		(4)		(5)		(6)		(7)
IQGC	-2.048		-2.286		-2.167		-2.214		-2.280		-1.957		-1.959
NM dummy															-0.552		-0.708		-0.680		-0.700		-0.704		0.632		-0.630
Exvot											-0.219		-0.216												-0.926		-0.946
OC1	-2.320												-0.003		-2.506												0.026
OC1_2	2.228														2.266
OC2			-3.918														-4.196
OC2_2			2.877														2.833
OC3					-5.637														-5.805
OC3_2					4.110														3.968
OC4							-5.679														-5.655
OC4_2							3.926														3.601
OC5									-4.207														-3.966
OC5_2									2.707														2.220
ROE	0.274		0.285		0.258		0.246		0.246		0.265		0.266		0.128		0.121		0.098		0.079		0.073		-0.129		0.128
Tang	2.981	***	2.933	***	2.934	***	2.970	***	3.015	***	3.052	***	3.052	***	2.927	***	2.872	***	2.874	***	2.916	***	2.965	***	3.031	***	3.034	***
Size	0.634	***	0.625	***	0.619	***	0.617	***	0.618	***	0.624	***	0.624	***	0.576	***	0.554	***	0.552	***	0.547	***	0.545	***	0.568	***	0.569	***
Const.	-10.339	***	-9.358	***	-8.747	***	-8.567	***	-8.955	***	-10.761	***	-10.769	***	-10.028	***	-8.764	***	-8.163	***	-7.989	***	-8.441	***	-10.437	^ indicates significance at 5%; *** indicates significance at 1%. Note: Logit models for panel data with year and sector dummy variables.	-10.458	***
No. obs.	1387		1387		1387		1387		1387		1387		1387		1387		1387		1387		1387		1387		1387		1387
No. firms.	147		147		147		147		147		147		147		147		147		147		147		147		147		147
Wald chi2	84.17	***	84.35	***	84.04	***	83.98	***	83.96	***	84.14	***	84.14	***	84.47	***	84.69	***	84.33	***	84.27	***	84.33	***	84.48	***	84.49	***

\begin{array}{l} S U B D E B T_{i, t} = β_{0} + β_{1} I Q G C_{i, t} + β_{2} {OwnCon}_{i, t} + \\ β_{3} {OwnCon}_{i, t}^{2}^{} + β_{4}_{} R O E_{i, t} + β_{5} T a n g_{i, t}^{} + β_{6} S i z e_{i, t} + \\ β_{7} S e c t o r_{i, t}^{} + β_{8} Y e a r_{i, t} + ε_{i, t} \end{array}

\begin{array}{l} S U B D E B T_{i, t} = β_{0} + β_{1} I Q G C_{i, t} + β_{2} {Exvot}_{i, t} + \\ [β_{3} {OwnCon}_{i, t} + β_{4} {OwnCon}_{i, t}^{2}^{}] + β_{5} R O E_{i, t} + \\ β_{6} T a n g_{i, t}^{} + β_{7} S i z e_{i, t} + β_{8} S e c t o r_{i, t}^{} + β_{9} Y e a r_{i, t} + ε_{i, t} \end{array}

[1] Responsible editor:

Prof. Dr. Wlamir Xavier

Brasil

Brasil

Subsidized debt, corporate governance, and ownership concentration of Brazilian firms

Abstract

Purpose

Theoretical framework

Design/methodology/approach

Findings

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Originality/value