CORPORATE GOVERNANCE AND MITIGATION OF THE RISK OF EXPROPRIATION OF NON-CONTROLLING SHAREHOLDERS
DOI:
https://doi.org/10.56238/arev8n6-087Keywords:
Expropriation, Non-Controlling Shareholders, Corporate Governance, B3Abstract
Internal corporate governance serves as a substitute for legal protection in fragile institutional environments. This study examines the relationship between corporate governance practices and the risk of expropriation of non-controlling shareholders in Brazilian publicly traded companies. The sample consists of 152 non-financial Brazilian companies listed on B3 from 2010 to 2022. Factor Analysis was used to construct expropriation risk indices that synthesize its various dimensions, and the Systemic Generalized Method of Moments (GMM-Sis) was used to address the endogeneity and temporal dynamics of the phenomenon. Three expropriation risk indices were selected: Type of Controller, Power of Controllers, and Wealth Transfer. The results indicated that corporate governance practices, such as higher percentages of tag-along rights granted to non-controlling shareholders, dividend distribution, and freely tradable shares on the market, reduce the risk of expropriation for non-controlling shareholders. Additionally, the high temporal persistence of expropriation was also confirmed. The research assists investors and analysts in assessing expropriation risk, helps companies identify the most effective internal governance mechanisms to counterbalance the power of controlling shareholders, and supports market guidance bodies and regulators in evaluating the best corporate governance practices to be adopted by companies.
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