Complexity and corporate governance: an analysis of companies listed on the BM&FBOVESPA*

Assunção, Renata Rouquayrol; Luca, Márcia Martins Mendes De; Vasconcelos, Alessandra Carvalho de

doi:10.1590/1808-057x201702660

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Articles • Rev. contab. finanç. 28 (74) • May-Aug 2017 • https://doi.org/10.1590/1808-057x201702660 copy

Complexity and corporate governance: an analysis of companies listed on the BM&FBOVESPA^* * Paper presented at The Third International Conference of the Journal of International Accounting Research, São Paulo, SP, Brazil, July 2015.

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

In light of the need to develop mechanisms of control, protection, and transparency regarding the relationships between principal and agent, and with the aim of eliminating or reducing the agency problem, corporate governance has emerged. Based on Agency Theory, separation of ownership and control of activities derives from the complexity of organizations. In this context, this study aims to analyze the relationship between dimensions of complexity and corporate governance in companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA), in which contingency factors might influence organizational characteristics. The investigation gathers data from a sample of 162 companies listed on the BM&FBOVESPA. The following statistical tests were used in the data analysis: Factor Analysis, Multiple Linear Regression, Correspondence Analysis, and Correlation Analysis. For measuring complexity, contingency variables such as age, size, diversification, and internationalization were adopted; and, to assess corporate governance, a representative index of the adoption of good governance practices was used. The results show that organizational complexity is explained by the size and diversification variables, whereas operational complexity is explained by the size, diversification, and internationalization variables. It was observed that in the two dimensions of complexity - organizational and operational - corporate governance was influenced by the diversification, internationalization, and age variables, with the latter involving an inverse relationship. It is concluded that companies displaying more complexity, in its two dimensions, record a higher level of corporate governance, which confirms the research hypothesis.

Keywords:
organizational complexity; operational complexity; corporate governance; agency theory

Dimension	Variables	Proxy	Operacionalization	Source of Data	Theoretical Foundation
Organizational Complexity	Age	Year of registration with the Brazilian Securities and Exchange Commission (CVM)	Difference between the base year (2012) and the year of registration with CVM.	Reference Form - Registrational Data Item - General Data - Date of Registration with CVM	Almeida et al. (2010); Assunção, De Luca, Gallon, and Cardoso (2014).
	Size	Company market value	Company market value, in thousand reais, on 12/31/2012.	Economática®	Boone et al. (2007) ; Linck et al. (2008).
	Diversification	Shares on foreign stock exchanges	Number of foreign stock exchanges in which the company’s shares are traded.	Reference Form - Item 18.7 and Registration Data - Foreign countries	Hassel, Höpner, Kurdelbusch, Rehder and, Zugehör (2003); Santos et al. (2013).
	Internationalization	Foreign share capital	Proportion of shares belonging to foreigners.	Reference Form - Item 15.1	Hassel et al. (2003); Santos et al. (2013).
Operational Complexity	Age	Year company was formed	Difference between base year (2012) and year of formation.	Reference Form - Registration Data Item - General Data - Date of Formation	Farias (2012).
	Size	Value of Total Assets	Consolidated Total Assets, in thousand reais, on 12/31/2012.	Economática®	Anderson et al. (2011); Farias (2012); Lin and Lee (2008).
	Diversification	Number of business segments	Number of operational activity segments in the company, in accordance with Technical Pronouncement CPC 22.	Explanatory Notes for the accounting statements closed on 12/31/2012 - Information by Segment Item	Anderson et al. (2011); Berry et al. (2006); Coles et al. (2008); Accounting Pronouncements Committee [CPC] (2009); Ferreira et al. (2011).
	Internationalization	Overseas revenue	Ratio between revenue obtained abroad and total company revenue.	Reference Form - Item 7.6	Lin and Lee (2008); Santos et al. (2013).

Dimension	Item analized	Source of Data	Theoretical Foundation
Access to and Content of Information	The company publishes the Annual Reports from previous years on its website.	Company website	Silveira (2004); IBGC (2009).
	The company publishes its Code of ethics and/or of Conduct on its website.	Company website	IBGC (2009).
	The company publishes a specific area related to Corporate Governance on its website.	Company website	Silveira (2004).
	The company publishes operational and/or economic-financial Forecasts.	Item 11.1 of RF	Silveira (2004).
Ownership and Control Structure	The company has only ordinary shares.	Itens 15.1/2 and 15.3 of RF	Silveira (2004); Silva and Leal (2005); IBGC (2009); Lameira and Ness Jr. (2011).
	The percentage of shares with voting rights belonging to the controllers is lower or equal to their participation in total company capital.	Item 15.1/2 of RF	Silveira (2004); Silva and Leal (2005); Lameira and Ness (2011).
	The company offers 100% tag-along for all partners.	BM&FBOVESPA website	Silveira (2004); Silva and Leal (2005); IBGC (2009); Lameira and Ness (2011).
Board of Directors	The positions of chairman of the board and CEO are occupied by different people.	Item 12.6/8 of RF	CVM (2002); Silveira (2004); Silva and Leal (2005); IBGC (2009); Lameira and Ness (2011).
	The Board of Directors is composed of 5 (five) to 11 (eleven) members.	Itens 12.1 and 12.6/8 of RF	CVM (2002); Silveira (2004); Silva and Leal (2005); IBGC (2009); Lameira and Ness (2011).
	The Board of Directors is composed of at least 50% independent members.	Item 12.6/8 of RF	Silveira (2004); Silva and Leal (2005); IBGC (2009); Lameira and Ness (2011).
	The mandate for the Board of Directors is no greater than 2 (two) years and it is unified.	Itens 12.1 and 12.6/8 of RF	CVM (2002); Silveira (2004); Silva and Leal (2005); IBGC (2009).
	The company uses performance evaluation mechanisms for the Board of Directors.	Item 12.1 of RF	IBGC (2009).
Other Corporate Governance Bodies and Agents	The company has an Audit Commitee.	Item 12.7 of RF	CVM (2002); IBGC (2009).
	The company has other advisory committees.	Item 12.7 of RF	CVM (2002); IBGC (2009); Lameira and Ness (2011).
	The company’s Fiscal Council is permanent.	Item 12.1 of RF	CVM (2002); Silva and Leal (2005); IBGC (2009); Lameira and Ness (2011).
	The company has a policy for executive pay.	Item 13.1 of RF	Silveira (2004); IBGC (2009).

Model		Non standardized coefficients		Standardized coefficients (Beta)	T	Sig.
Model		B	Standard error
Organizational complexity	(Constant)	0.539	0.024		22.571	0
	MV	7.45E-10	0.000	0.072	0.83	0.408
	AGE	-0.005	0.001	-0.439	-6.338	0.000
	FOR	0.105	0.035	0.259	3.022	0.003
	CAP	0.191	0.095	0.14	2	0.047
Operational complexity	(Constant)	0.468	0.033		14.081	0.000
	TIME	-0.002	0.001	-0.402	-4.426	0.000
	SIZE	-1.88E-10	0.000	-0.03	-0.313	0.755
	SEGM	0.034	0.011	0.284	3.067	0.003
	REC	0.284	0.084	0.322	3.369	0.001

Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade, Departamento de Contabilidade e Atuária Av. Prof. Luciano Gualberto, 908 - prédio 3 - sala 118, 05508 - 010 São Paulo - SP - Brasil, Tel.: (55 11) 2648-6320, Tel.: (55 11) 2648-6321, Fax: (55 11) 3813-0120 - São Paulo - SP - Brazil
E-mail: recont@usp.br

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[1] Address for correspondence: Renata Rouquayrol Assunção Universidade Federal do Ceará, Faculdade de Economia, Administração, Atuária e Contabilidade, Departamento de Contabilidade Avenida da Universidade, 2431 - CEP: 60020-180 Benfica - Fortaleza - CE - Brazil Email: renatafeaac@gmail.com

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Complexity and corporate governance: an analysis of companies listed on the BM&FBOVESPA* * Paper presented at The Third International Conference of the Journal of International Accounting Research, São Paulo, SP, Brazil, July 2015.

ABSTRACT

Complexity and corporate governance: an analysis of companies listed on the BM&FBOVESPA^* * Paper presented at The Third International Conference of the Journal of International Accounting Research, São Paulo, SP, Brazil, July 2015.