Do shareholder agreements affect market valuation?: Evidence from Brazilian listed firms

Shareholder agreements are contracts that govern the relationship among different shareholders in a firm. This article uses a unique dataset to analyze shareholder agreements in listed companies and shows how they affect firm valuation. While shareholder agreements may be used to expropriate value f...

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Bibliographic Details
Published in:Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 2012-09, Vol.18 (4), p.919
Main Author: Carvalhal, Andre
Format: Article
Language:English
Subjects:
Agreements
Conflicts of interest
Corporate governance
Hierarchies
Market value
Minority stockholders
Shareholder relations
Stockholders
Studies
Valuation
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Summary:Shareholder agreements are contracts that govern the relationship among different shareholders in a firm. This article uses a unique dataset to analyze shareholder agreements in listed companies and shows how they affect firm valuation. While shareholder agreements may be used to expropriate value from non-controlling investors, they can also mitigate conflicts of interest and protect minority shareholders. The analysis of a broad time-series and cross-section of Brazilian listed firms provides evidence that the latter effect dominates. We build a shareholder agreement index in order to measure on a firm-level basis the degree of investor protection granted by shareholder agreements. Companies with shareholder agreements have higher valuation and the degree of investor protection granted by shareholder agreements is positively related to firm value, even after controlling for the endogeneity of the firm's decision to adopt shareholder agreements. [PUBLICATION ABSTRACT]
ISSN:0929-1199
1872-6313
DOI:10.1016/j.jcorpfin.2012.04.003