Board of Directors: an analysis of the impact in debt levels

Abstract

The financial scandals of the last two decades have highlighted the debate on corporate governance practices of companies. In the same period non-governmental bodies have contributed to the evolution of governance, enabling greater security for potential investors. In this context, the board is presented as a mechanism for Corporate Governance, whose mission is to protect and enhance the assets and maximize the return of corporate investments. This article aims to determine the influence of the board on the indebtedness of companies listed in different levels of corporate governance BM&FBovespa, in the year 2008. The present work can be classified as a descriptive and empirical research. To analyze the influence of advice on corporate debt we have used OLS method, a sample of 129 companies. The results have shown that the proxy board presented a negative relationship with total debt and long-term. For the short-term debt ratio was positive. These results can be interpreted as a sign that companies with best governance practices, i.e. with higher scores on the index used, tend to use more short-term debt and less long-term debt. Thus, it is understood that due to concentration of ownership of Brazilian companies, this evidence reflects the debt aversion on the part of drivers. Another interpretation would be that debt, in particular, the short-term debt has a potential to discipline managers.