Ownership, control, valuation and performance of Brazilian corporations

Abstract

This paper analyzes the ownership and control structure of Brazilian companies and the effect of cash flow and voting rights on firm valuation and performance. Ownership is quite concentrated in Brazil with most companies being controlled by a single direct shareholder. We find evidence that non-voting shares and indirect control structures are largely used to concentrate control with reduced overall investment in the company. Our results support the hypothesis that firm valuation and performance are positively related to cash flow concentration, and negatively related to voting concentration and to the separation of voting from cash flow rights. Moreover, firm valuation and performance are relatively higher for firms with controlling shareholders when compared to firms without controlling shareholders.