An Analysis of the Influence of Controlling Shareholder Identity over Earnings Informativeness on Brazilian Capital Market

Abstract

This paper aimed to investigate the influence of controlling shareholder identity over earnings informativeness and to contribute empirically on the advance on the understanding of the agency conflict between controlling shareholders and minority investors through the lens of value relevance. The research sample considered 104 shares of non-financial firms negotiated on BM&FBovespa from 2011 to 2016. The methodology was conducted through panel data regression analysis. As results, this paper concludes with the following findings: i) the higher the control/vote power of controlling shareholder (ownership concentration) and the lower the stock liquidity, the less informative are the earnings and the greater is the probability of entrenchment and wealth expropriation by controlling shareholders; ii) larger firms and highly leveraged firms have more informative earnings; iii) the stock prices reflect the controlling shareholder identity; iv) Firms controlled by financial institutions, nonfinancial institutions and the government are much more likely to expropriate minority investors wealth and have less informative earnings; v) family firms are positively priced by the market.