The governance structure and strategy of Brazilian family business groups

• Grant number: 13/26512-8
• Support Opportunities: Regular Research Grants
• Duration: May 01, 2014 - April 30, 2016
• Field of knowledge: Applied Social Sciences - Administration - Business Administration
• Principal Investigator: Luiz Ricardo Kabbach de Castro
• Grantee: Luiz Ricardo Kabbach de Castro
• Host Institution: Escola de Engenharia de São Carlos (EESC). Universidade de São Paulo (USP). São Carlos , SP, Brazil
• Associated researchers: Guilherme Kirch ; Rafel Crespi ; Ruth Aguilera

Abstract

This project aims to analyse the evolution of pyramidal ownership structure of Brazilian family business groups and its impact on strategy and performance of affiliated firms. The literature on corporate governance and finance usually takes the ownership structure of business groups as given and analyses its effect on firms' economic performance. However, little is known about how this structure evolves. In particular, although there have been some theoretical efforts to explain the formation of pyramidal structures on business groups, empirical studies demonstrating the evolution of these structures are still scarce, and the Brazilian context unexplored.Drawing upon Almeida and Wolfenzon's (2006) theory of pyramids, we analyse the evolution of pyramidal structures in Brazilian family business groups, over the period between 1997 and 2012, as a way to determine the prevalence of selection or tunnelling effects. Following these analyses, we advance the literature on the effect of ownership structure on firm's performance. To do so, we develop a system of simultaneous equations that specify the relationship between corporate governance, economic performance and financial strategies constructs. This methodology allows us to understand the effect of ownership structure on financial decisions as well as firm performance while relaxing the assumption that ownership is exogenous to corporate strategy.A better understanding of the relationship between corporate governance, financial strategies and economic performance may provide important insights for public policies that aim to improve governance practices in the Brazilian institutional environment and, eventually, stimulate private investment, contributing to the development of the Brazilian capital market.The results of this research will be submitted to peer-review journals both at national and international levels and scholarly conferences. (AU)

Scientific publications

(5)

(References retrieved automatically from Web of Science and SciELO through information on FAPESP grants and their corresponding numbers as mentioned in the publications by the authors)

MACORIS, LUCAS S.; RICARDO KABBACH-DE-CASTRO, LUIZ; KALATZIS, AQUILES E. G.; BOEHE, DIRK M.. Cross-border and domestic minority acquisitions and financial constraints: Reaping big benefits from small shareholders. CORPORATE GOVERNANCE-AN INTERNATIONAL REVIEW, v. N/A, p. 24-pg., 2022-07-12. (13/26512-8)

KABBACH-DE-CASTRO, LUIZ RICARDO; KALATZIS, AQUILES ELIE GUIMARAES; PELLICANI, ALINE DAMASCENO. Do financial constraints in an unstable emerging economy mitigate the opportunistic behavior of entrenched family owners?. EMERGING MARKETS REVIEW, v. 50, p. 16-pg., 2022-03-01. (13/26512-8)

KABBACH-DE-CASTRO, LUIZ RICARDO; KIRCH, GUILHERME; MATTA, RAFAEL. Do internal capital markets in business groups mitigate firms? financial constraints?. JOURNAL OF BANKING & FINANCE, v. 143, p. 15-pg., 2022-10-01. (13/26512-8)

CAIXE, DANIEL FERREIRA; GUIMARAES KALATZIS, AQUILES ELIE; KABBACH DE CASTRO, LUIZ RICARDO. Controlling shareholders and investment-risk sensitivity in an emerging economy. EMERGING MARKETS REVIEW, v. 39, p. 133-153, JUN 2019. (13/26512-8)

RICARDO KABBACH-DE-CASTRO, LUIZ; MARTINS, HENRIQUE CASTRO; SCHIEHLL, EDUARDO; SOARES TERRA, PAULO RENATO. Investment-cash flow sensitivity and investor protection. JOURNAL OF BUSINESS FINANCE & ACCOUNTING, v. N/A, p. 37-pg., 2022-09-17. (13/26512-8)