Corporate Governance Myths in Brazil : An Analysis of Common Statements Made by Market Practitioners

Corporate governance has become a hot topic in Brazil in the past few years, with several events and lectures about the subject taking place nowadays. At these venues, it's possible to identify some common statements about this topic made by market practitioners which have seemed to become uncontested truths. However, many of these beliefs succumb to a more theoretically and empirically structured analysis. They can be considered Brazilian quot;corporate governance mythsquot;. This essay qualitatively analyses seven main Myths: 1) Bovespa's Corporate Governance Index (IGC) as a proof of the value of good governance; 2) the higher expected stock returns from companies with better governance; 3) the importance of the tag along, a mandatory bid rule in case of control transfers; 4) the entrepreneur who must be in control; 5) the need for a poison pill; 6) the prospectus as an evidence of transparency; and 7) the sustainability as the new corporate objective-function. The goal is to deconstruct such statements by showing that theoretical and empirical evidence on these issues do not seem to support such common views. As a result, this work may help to bridge the gap between current worldwide research on corporate governance and market practitioners, both in Brazil and in countries where similar statements have been made in corporate governance market events