Corporate governance and efficiency in the Electricity Sector using Data Envelopment Analysis: a study in the brazilian stock market

Abstract

Different Corporate Governance mechanisms have been suggested to minimize agency problems between managers and shareholders, and between controlling and minority shareholders. The aim of this study is to analyze the corporate governance mechanisms result in greater efficiency for Brazilian stock companies in the electricity sector, in 2007-2009. The hypothesis to be verified is that the lower the voting concentration   and the dependence of the council, and the greater the cash flow concentration, the greater the performance of the company will be. The analyzed sample involved thirty-three companies, fourteen being classified into one of the levels of CG (Level 1, Level 2 or New Market) and the remainder being members of the traditional market. To measure the efficiency of the companies, the non-parametric DEA (Data Envelopment Analysis) method was used, and to relate the efficiency with the governance variables, we adopted regression analysis of panel data. The results demonstrated that the use of CG mechanisms positively influences business efficiency, but not in the expected magnitude. It was found that the cash flow concentration is positively related to the efficiency of firms, supporting the governance literature. For future work, the use of other input and output variables is suggested.