CORPORATE GOVERNANCE AND POLITICAL CONNECTIONS IN ANTI-CORRUPTION PRACTICES

KOPROWSKI, SIRLENE; KREIN, VIVIANE; MAZZIONI, SADY; MAGRO, CRISTIAN BAÚ DAL

SIRLENE KOPROWSKI sady@unochapeco.edu.br

Universidade Comunitária da Região de Chapecó, Programa de Pós-Graduação em Ciências Contábeis e Administração, Chapecó, SC, Brazil

https://orcid.org/0000-0002-6661-2697

VIVIANE KREIN vivianekrein@unochapeco.edu.br

Universidade Comunitária da Região de Chapecó, Programa de Pós-Graduação em Ciências Contábeis e Administração, Chapecó, SC, Brazil

https://orcid.org/0000-0002-2768-6992

SADY MAZZIONI sady@unochapeco.edu.br

Universidade Comunitária da Região de Chapecó, Programa de Pós-Graduação em Ciências Contábeis e Administração, Chapecó, SC, Brazil

https://orcid.org/0000-0002-8976-6699

CRISTIAN BAÚ DAL MAGRO crisbau@unochapeco.edu.br

Universidade Comunitária da Região de Chapecó, Programa de Pós-Graduação em Ciências Contábeis e Administração, Chapecó, SC, Brazil

https://orcid.org/0000-0002-7609-5806

sirlene.koprowski@unochapeco.edu.br

vivianekrein@unochapeco.edu.br

sady@unochapeco.edu.br

crisbau@unochapeco.edu.br

Evaluated through double blind review. Invited scientific editor: Francisval Carvalho

AUTHORS’ CONTRIBUTIONS

The authors declare that they contributed equally from the conceptualization and theoretical-methodological construction, theoretical revision (literature survey), data analysis, and finally writing and final review. The data collection was conducted by Sirlene Koprowski and Viviane Krein.

Description

Anticorrupção; código de conduta; código de ética; combate à corrupção; compliance; corrupção; extorsão; Lava Jato; Lavagem de Dinheiro; Lei n. 12.846; propina; suborno(s); transparência
[Anti-corruption; code of conduct; code of ethics; fight against corruption; compliance; corruption; extorsion; Operation Car Wash; money laundering; Law 12,846; bribery; transparency].

Keyword	Description found
*Anti-corruption*	Anti-corruption is part of the vendor contracting process since the bidding phase, when we present the Vendor Code of Conduct, which has topics based on the principles of the United Nations Global Compact, to the contract's signing, with Socioenvironmental Responsibility clauses (Banco Santander S.A., 2017).
*Anti-corruption*	In 2017, the Board of Directors voted the revision of the Code of Ethical Conduct. In addition, policies were revised and mandatory e-learning processes carried out with all employees in order to disseminate the anti-corruption and money laundering prevention culture (Cielo S.A., 2017).

Description	Metric	Source	Authors
Disclosure of Anti-corruption Practices (DAP)	Ratio between keywords and number of report pages	Sustainability reports	Gamerschlag, Möller e Verbeeten (2011)Gamerschlag, R., Möller, K., & Verbeeten, F. (2011). Determinants of voluntary CSR disclosure: Empirical evidence from Germany. Review of Managerial Science, 5(2-3), 233-262. doi:10.1007/s11846-010-0052-3 https://doi.org/10.1007/s11846-010-0052-...

Description	Metric	Authors
BOD size (BODS)	Total number of BOD members.	Wu (2005)Wu, X. (2005). Corporate governance and corruption: A cross-country analysis.Governance, 18(2), 151-170. doi: 10.1111/j.1468-0491.2005.00271.x https://doi.org/10.1111/j.1468-0491.2005... ; Donnelly e Mulcahy (2008)Donnelly, R., & Mulcahy, M. (2008). Board structure, ownership, and voluntary disclosure in Ireland.Corporate Governance: An International Review, 16(5), 416-429. doi: 10.1111/j.1467-8683.2008.00692.x https://doi.org/10.1111/j.1467-8683.2008... ; Bierstaker (2009)Bierstaker, J. L. (2009). Differences in attitudes about fraud and corruption across cultures: Theory, examples and recommendations.Cross Cultural Management: An International Journal, 16(3), 241-250. doi: 10.1108/13527600910977337 https://doi.org/10.1108/1352760091097733... ; Khan et al. (2013)Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics, 114(2), 207-223. doi: 10.1007/s10551-012-1336-0 https://doi.org/10.1007/s10551-012-1336-... ; Frías-Aceituno et al. (2014)Frías-Aceituno, J. V., Rodríguez-Domínguez, L., & García-Sánchez, I. M. (2014). Políticas contra la corrupción y el soborno: Se involucran de manera similar los consejeros en diferentes entornos corporativos? Revista Europea de Dirección y Economía de la Empresa, 23(1), 31-42. doi: 10.1016/j.redee.2013.09.004 https://doi.org/10.1016/j.redee.2013.09.... ; Agyei-Mensah (2017)Agyei-Mensah, B. K. (2017). The relationship between corporate governance, corruption and forward-looking information disclosure: A comparative study. Corporate Governance: The International Journal of Business in Society, 17(2), 284-304. doi: 10.1108/CG-11-2015-0150 https://doi.org/10.1108/CG-11-2015-0150... ; Kaymak e Bektas (2017)Kaymak, T., & Bektas, E. (2017). Corporate social responsibility and governance: Information disclosure in multinational corporations.Corporate Social Responsibility and Environmental Management, 24(6), 555-569. doi: 10.1002/csr.1428 https://doi.org/10.1002/csr.1428... ; Na et al. (2018)Na, K., Kang, Y. H., & Kim, Y. (2018). The effect of corporate governance on the corruption of firms in BRICs (Brazil, Russia, India & China).Social Sciences, 7(6), 1-16. doi: 10.3390/socsci7060085 https://doi.org/10.3390/socsci7060085... .
Percentage of external board members (EBM)	Proportion between the number of independent board members in relation to total number of members.
Level of Corporate Governance (CG)	Dummy variable equal to 1 for Novo Mercado and/or corporate governance level 2.
Audited by one of the Big Four (AUD)	Dummy variable, 1 for big four-audited companies and 0 otherwise.	Ho e Wong (2001)Ho, S. S., & Wong, K. S. (2001). A study of the relationship between corporate governance structures and the extent of voluntary disclosure. Journal of International Accounting, Auditing and Taxation, 10(2), 139-156. doi: 10.1016/S1061-9518(01)00041-6 https://doi.org/10.1016/S1061-9518(01)00... ; Said et al. (2009)Said, R., Zainuddin, Y. H., & Haron, H. (2009). The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Social Responsibility Journal, 5(2), 212-226. doi:https://doi.org/10.1108/17471110910964496 https://doi.org/10.1108/1747111091096449... ; Malaguenõ et al. (2010)Malagueño, R., Albrecht, C., Ainge, C., & Stephens, N. (2010). Accounting and corruption: A cross-country analysis. Journal of Money Laundering Control, 13(4), 372-393. doi: 10.1108/13685201011083885 https://doi.org/10.1108/1368520101108388... ; Owolabi (2011)Owolabi, A. (2011). Corruption and the environment of accounting and auditing in Africa.International Journal of Critical Accounting, 3(2-3), 220-234. doi: 10.1504/IJCA.2011.039752 https://doi.org/10.1504/IJCA.2011.039752... ; Khan et al. (2013)Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics, 114(2), 207-223. doi: 10.1007/s10551-012-1336-0 https://doi.org/10.1007/s10551-012-1336-... ; Healy e Serafeim (2015)Healy, P. M., & Serafeim, G. (2015). An analysis of firms self-reported anticorruption efforts.The Accounting Review, 91(2), 489-511. doi: 10.2308/accr-51191 https://doi.org/10.2308/accr-51191... ; Na et al. (2018)Na, K., Kang, Y. H., & Kim, Y. (2018). The effect of corporate governance on the corruption of firms in BRICs (Brazil, Russia, India & China).Social Sciences, 7(6), 1-16. doi: 10.3390/socsci7060085 https://doi.org/10.3390/socsci7060085... .
Audit Committee size (AUDS)	Total of members in the audit committee.
Audit Committee independence (AUDI)	Proportion between the number of independent committee members in relation to total number of members.

Description	Metric	Authors
Political connections through board members with political expertise (POLC)	Proportion of board members with political expertise.	Camilo et al. (2012)Camilo, S. P. O., Marcon, R., & Bandeira-de-Mello, R. (2012). Conexões políticas das firmas e seus efeitos na performance: Uma convergência entre as perspectivas da governança e da dependência de recursos um ensaio teórico.Revista Alcance, 19(2), 241-258. doi: 10.14210/alcance.v19n2.p241-258 https://doi.org/10.14210/alcance.v19n2.p... ; Huang e Zhao (2016)Huang, H., & Zhao, Z. (2016). The influence of political connection on corporate social responsibility-evidence from listed private companies in China.International Journal of Corporate Social Responsibility, 1(1), 1-9. doi: 10.1186/s40991-016-0007-3 https://doi.org/10.1186/s40991-016-0007-... ; Wang et al. (2017)Wang, Z., Chen, M. H., Chin, C. L., & Zheng, Q. (2017). Managerial ability, political connections, and fraudulent financial reporting in China.Journal of Accounting and Public Policy, 36(2), 141-162. doi: 10.1016/j.jaccpubpol.2017.02.004 https://doi.org/10.1016/j.jaccpubpol.201... .
Political connections through government shareholding (GOVSH)	Dummy variable, 1 for companies with direct or indirect government shareholding, and 0 otherwise.	Nasir e Abdullah (2004)Nasir, N. M., & Abdullah, S. N. (2004). Voluntary disclosure and corporate governance among financially distressed firms in Malaysia.Financial Reporting, Regulation and Governance, 3(1), 1-39. ; Khan et al. (2013)Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics, 114(2), 207-223. doi: 10.1007/s10551-012-1336-0 https://doi.org/10.1007/s10551-012-1336-... ; Huang e Zhao (2016)Huang, H., & Zhao, Z. (2016). The influence of political connection on corporate social responsibility-evidence from listed private companies in China.International Journal of Corporate Social Responsibility, 1(1), 1-9. doi: 10.1186/s40991-016-0007-3 https://doi.org/10.1186/s40991-016-0007-... ; Said et al. (2009)Said, R., Zainuddin, Y. H., & Haron, H. (2009). The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Social Responsibility Journal, 5(2), 212-226. doi:https://doi.org/10.1108/17471110910964496 https://doi.org/10.1108/1747111091096449... .

Description	Metric	Authors
Size (SIZE)	Natural logarithm of the average book value of total assets.	Frías-Aceituno et al. (2014)Frías-Aceituno, J. V., Rodríguez-Domínguez, L., & García-Sánchez, I. M. (2014). Políticas contra la corrupción y el soborno: Se involucran de manera similar los consejeros en diferentes entornos corporativos? Revista Europea de Dirección y Economía de la Empresa, 23(1), 31-42. doi: 10.1016/j.redee.2013.09.004 https://doi.org/10.1016/j.redee.2013.09.... ; Agyei-Mensah (2017)Agyei-Mensah, B. K. (2017). The relationship between corporate governance, corruption and forward-looking information disclosure: A comparative study. Corporate Governance: The International Journal of Business in Society, 17(2), 284-304. doi: 10.1108/CG-11-2015-0150 https://doi.org/10.1108/CG-11-2015-0150... .
Ownership Concentration (OC)	Percentage of common shares held by the largest shareholder..	Agyei-Mensah (2017)Agyei-Mensah, B. K. (2017). The relationship between corporate governance, corruption and forward-looking information disclosure: A comparative study. Corporate Governance: The International Journal of Business in Society, 17(2), 284-304. doi: 10.1108/CG-11-2015-0150 https://doi.org/10.1108/CG-11-2015-0150... ; Na et al. (2018)Na, K., Kang, Y. H., & Kim, Y. (2018). The effect of corporate governance on the corruption of firms in BRICs (Brazil, Russia, India & China).Social Sciences, 7(6), 1-16. doi: 10.3390/socsci7060085 https://doi.org/10.3390/socsci7060085... .
Industry (IND)	Dummy variable, 1 for companies in construction, oil, gas and biofuel industries, and 0 otherwise.	Frías-Aceituno et al. (2014)Frías-Aceituno, J. V., Rodríguez-Domínguez, L., & García-Sánchez, I. M. (2014). Políticas contra la corrupción y el soborno: Se involucran de manera similar los consejeros en diferentes entornos corporativos? Revista Europea de Dirección y Economía de la Empresa, 23(1), 31-42. doi: 10.1016/j.redee.2013.09.004 https://doi.org/10.1016/j.redee.2013.09.... ; Na et al. (2018)Na, K., Kang, Y. H., & Kim, Y. (2018). The effect of corporate governance on the corruption of firms in BRICs (Brazil, Russia, India & China).Social Sciences, 7(6), 1-16. doi: 10.3390/socsci7060085 https://doi.org/10.3390/socsci7060085... .
ISE Portfolio (ISE)	Dummy variable, 1 for companies in the ISE portfolio, and 0 otherwise.	Ricardo, Barcellos e Bortolon (2017)Ricardo, V. S., Barcellos, S. S., & Bortolon, P. M. (2017). Relatório de sustentabilidade ou relato integrado das empresas listadas na BM&FBovespa: Fatores determinantes de divulgação. Revista de Gestão Social e Ambiental, 11(1), 90-104. doi: 10.24857/rgsa.v11i1.1233 https://doi.org/10.24857/rgsa.v11i1.1233... .

	Anti-corruption		Code of conduct		[ode of ethics		Fight against corruption		*Compliance*		Corruption		Extorsion
Year	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017
Obs.	262	379	184	267	331	329	17	279	420	712	601	730	20	10

	Money laundering		Operation Car Wash		Law n. 12.846/2013		Bribery		Bribery		Transparence		Total
Year	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017
Obs.	52	90	12	16	09	36	12	19	29	29	611	725	2560	3621

Variables	2016 N=372				2017 N=368
Variables	Mean	SD	Min.	Max.	Mean	SD	Min.	Max.
Disclosure of anticorruption practices	0.08	0.18			0.10	0.20	0.00	0.91
BOD size	6.07	2.63			6.10	2.79	3.00	17.00
Percentage of external board members	0.18	0.23			0.19	0.23	0.00	0.88
Audit committee size	0.72	1.44	0.00	6.00	0.902	1.53	0.00	6.00
Audit committee independence	0.01	0.07	0.00	0.50	0.01	0.07	0.00	0.60
Board members with political expertise	0.11	0.18			0.11	0.18	0.00	0.88
Company size	24,232,826.17	131,299,362.49			22,688,990.77	130,376,312.98
Ownership concentration	47.83	33.52	0.00	100.00	46.33	34.44	0.00	100.00
Variables	2016				2017
Variables	YES	%	NO	%	YES	%	NO	%
Corporate governance level	169	45.43	203	54.57	167	45.38	201	54.62
Big Four audit firm	275	73.90	97	26.10	255	69.3	113	30.7
Government shareholding	37	9.90	335	90.10	39	10.6	329	89.4
Industry	33	8.90	339	91.10	32	8.7	336	91.3
ISE Portfolio	32	8.60	340	91.40	30	8.2	338	91.8

Dependent Variable: Disclosure of Anti-corruption Practices (DAP)
Independent variables	Linear regression with year fixed effects and robust standard error
Independent variables	Model a	Model b	Model a	Model b	Model a	Model b
BOD size	0.007^ Significant at 5%;	0.0003
Percentage of external board members	0.068^ Significant at 5%;	0.0848
Big Four audit firm			0.022^ Significant at 5%;	0.047
Audit committee size			0.012^ Significant at 5%;	0.022^ Significant at 5%;
Audit committee independence			0.060	-0.101
Corporate governance level					0.036^ Significant at 5%;	-0.014
Board members with political expertise					-0.012	-0.173^ Significant at 5%;
Government shareholding					0.101^ Significant at 5%;	0.125^ Significant at 5%;
Company size	0.041^ Significant at 5%;	0.049^ Significant at 5%;	0.042^ Significant at 5%;	0.029	0.041^ Significant at 5%;	0.046^ Significant at 5%;
Ownership concentration	0.001^ Significant at 5%;	0.001^* * Significant at 10%.	0.001^ Significant at 5%;	0.001	0.001^ Significant at 5%;	0.001
Industry	-0.045^ Significant at 5%;	0.108	-0.028	0.165	-0.042^ Significant at 5%;	0.153
ISE Portfolio	0.205^ Significant at 5%;	0.063^* * Significant at 10%.	0.216^ Significant at 5%;	0.073^ Significant at 5%;	0.201^ Significant at 5%;	0.072^ Significant at 5%;
(Constant)	-0.256^ Significant at 5%;	-0.052	-0.237^ Significant at 5%;	0.039	-0.225^ Significant at 5%;	0.010
Observations	740	181	740	181	740	181
Adjusted R²	0.2918	0.1036	0.2897	0.1373	0.2989	0.1455
Prob > F.	0.000^ Significant at 5%;	0.004^ Significant at 5%;	0.000^ Significant at 5%;	0.001^ Significant at 5%;	0.000^ Significant at 5%;	0.000^ Significant at 5%;
Breusch-pagan	0.000	0.8952	0.000	0.6727	0.000	0.6292
Hausman	0.032^ Significant at 5%;	0.045^ Significant at 5%;	0.021^ Significant at 5%;	0.033^ Significant at 5%;	0.004^ Significant at 5%;	0.008^ Significant at 5%;
Durbin Watson	1.875	1.903	1.859	1.802	1.941	1.994
VIF	<1.638	<1.418	<1.443	<1.353	<1.620	<1.599

Dependent Variable: Disclosure of Anti-corruption Practices (DAP)
Independent Variables	Linear regression with year fixed effects and robust standard error		Multiple Linear Regression
Independent Variables	Model a	Model b	Model a	Model b
BOD size	0.0026	-0.0017	0.0026	-0.0017
Percentage of external board members	*0.0675^ * Significant at 10%.**	0.1167	0.0690^ Significant at 5%;	0.1169
Big Four audit firm	0.0151	0.0341	0.0136	0.0339
Audit committee size	0.0069	0.0188^ Significant at 5%;	0.0073	0.0188^ Significant at 5%;
Audit committee independence	0.0340	-0.1077	0.0322	-0.1074
Corporate governance level	0.0061	-0.0557	0.0057	-0.0557
Board members with political expertise	-0.0179	-0.1564^ Significant at 5%;	-0.0183	-0.1569^ Significant at 5%;
Government shareholding	0.0962^ Significant at 5%;	0.1133^ Significant at 5%;	0.0965^ Significant at 5%;	0.1135^ Significant at 5%;
Company size	0.0339^ Significant at 5%;	0.0377^* * Significant at 10%.	0.0339^ Significant at 5%;	0.0377^* * Significant at 10%.
Ownership concentration	0.0004^ Significant at 5%;	0.0007	0.0004^ Significant at 5%;	0.0007
Industry	-0.0372^ Significant at 5%;	0.1318	*-0.0375^ * Significant at 10%.**	0.1318
ISE portfolio	0.2014^ Significant at 5%;	0.0851^ Significant at 5%;	0.2010^ Significant at 5%;	0.0849^ Significant at 5%;
(Constant)	-0.2144^ Significant at 5%;	0.0224	-0.2045^ Significant at 5%;	0.0234
Observations	740	181	740	181
Adjusted R²	0.3157	0.1899	0.3135	0.1899
Prob > F.	0.000^ Significant at 5%;	0.000^ Significant at 5%;	0.000^ Significant at 5%;	0.000^ Significant at 5%;
Breusch-pagan	0.000	0.5613	0.000	0.5613
Hausman	0.034^ Significant at 5%;	0.048^ Significant at 5%;	0.034^ Significant at 5%;	0.048^ Significant at 5%;
Durbin Watson	1.917	1.897	1.917	1.897
VIF	<2.060	<1.689	<2.060	<1.689

[1] sirlene.koprowski@unochapeco.edu.br

Brasil

Brasil

CORPORATE GOVERNANCE AND POLITICAL CONNECTIONS IN ANTI-CORRUPTION PRACTICES

ABSTRACT

DAP_it=β_o+β₁BODS_it+β₂EBM_it+β₃SIZE_it+β₄OC_it+β₅IND_it+β₆ISE_it+ε	(1)
DAP_it=β_o+β₁AUD_it+β₂AUDS_it+β₃AUDI_it+β₄SIZE_it+β₅OC_it+β₆IND_it+β₇ISE_it+ε	(2)
DAP_it=β_o+β₁CG_it+β₂POLC_it+β₂GOVSH_it+β₃SIZE_it+β₄OC_it+β₅IND_it+β₆ISE_it+ε	(3)
DAP_it= β_o+β₁BODS_it+β₂EBM_it+ β₃AUD_it+β₄AUDS_it+β₅AUDI_it+ β₆CG_it+β₇POLC_it+β₈GOVSH_it+ β₉SIZE_it + β₁₀OC_it + β₁₁IND_it + β₁₂ISE_it + ε	(4)