GOOD CORPORATE GOVERNANCE PRACTICES IN BRAZILIAN COMPANIES AND THE RISK-RETURN DILEMMA

Abstract

When adhering to good corporate governance practices, companies can enjoy a range of benefits, among which stands out the reduction in risk. Thus, based on risk-return dilemma, investors require lower returns from companies with fewer risks. The research that gave origin to the present article had as objective to investigate the relationship between adherence to good corporate governance, risk and return. It starts with the hypothesis that firms with greater adherence to good corporate governance have lower risk and lower return. It is exploratory and descriptive research, which has adopted procedures bibliographic and documentary and of quantitative nature, gathering a sample of 266 Brazilian companies listed on BM&FBovespa in 2009. The risk and return variables were measured, respectively, by the standard deviation of the Earnings Before Interest and Taxes (EBIT) over total assets and the return on equity, both obtained in the database software Economática ®. As for the variable corporate governance, adherence to good practice was established by listing in the segments of BM&FBovespa. For the statistical evaluation of the correlation between the variables we used the Multiple Correspondence Analysis. The results of the research had evidenced that a greater adherence to good corporate governance practices is associated with an average risk-low return and a medium-low, having thus subsidies for rejection of the hypothesis of the research.