Governance practices and corporate value: a recent literature survey

Abstract

This article offers a survey of the recent international literature on the relationship between corporate governance practices and corporate value. The review includes a number of papers dealing with Brazil as well. The survey is organized in two sections. The first one examines the relationship between corporate value and voting rights and cash flow rights percentage holdings of controlling shareholders. The greater the separation between voting rights and control rights the greater the negative impact of voting rights concentration on corporate value should be. Corporate governance practices may also be gauged with indexes. A number studies have used existing indexes or built their own. A discussion on the possibility of performance and governance practices being endogenously determined is included in each section, with suggestions on how to treat the problem in empirical research. Governance practices are strongly associated to corporate value where there is less legal protection, such as in emerging markets like Brazil.