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Article
Publication date: 31 August 2012

Helder Ferreira de Mendonça, Délio José Cordeiro Galvão and Renato Falci Villela Loures

The purpose of this paper is to see if a difference exists between the impact of the subprime crisis on countries with more transparency and more regulated finance than on others…

2220

Abstract

Purpose

The purpose of this paper is to see if a difference exists between the impact of the subprime crisis on countries with more transparency and more regulated finance than on others. A further objective is to explain the success of the Brazilian case in avoiding the financial crisis and to show empirical evidence for the presence of market discipline.

Design/methodology/approach

The paper offers a regulation and transparency index (RTI) based on 37 countries. Considering RTI and stock market index of developed economies, BRICs economies, and developing economies, cross‐country estimations are made. Furthermore, the analysis for market discipline in the Brazilian case is based on GMM panels, taking into account market discipline through subordinated debt holders (debentures).

Findings

The results indicate that a higher degree of regulation and transparency is related to a higher return and a lower volatility in the stock market during the subprime crisis. Moreover, one of the main reasons for the apparent success of the Brazilian case in facing the crisis is the combination of a strong regulation of the financial system and the presence of market discipline.

Practical implications

Transparency of information by the banking sector is relevant for the regulation of the financial system.

Originality/value

The paper presents new insights for the literature on financial regulation and transparency of information in the search for a framework capable of avoiding financial crisis.

Details

Journal of Economic Studies, vol. 39 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 2 March 2011

Gyorgy Varga and Maxim Wengert

This chapter describes the evolution of the Brazilian investment fund industry and the impact of domestic and international crises on investors, managers and the main types of…

Abstract

This chapter describes the evolution of the Brazilian investment fund industry and the impact of domestic and international crises on investors, managers and the main types of funds offered in Brazil. In particular, it explores the effect of the subprime crisis and shows that the first wave of this crisis had very little impact, but the second wave with the collapse of Lehman Brothers did have a major impact on risk, returns and flows of the mutual fund industry in Brazil.

Details

The Impact of the Global Financial Crisis on Emerging Financial Markets
Type: Book
ISBN: 978-0-85724-754-4

Keywords

Article
Publication date: 28 January 2014

Vicente Lima Crisóstomo, Félix Javier López Iturriaga and Eleuterio Vallelado González

– The purpose of this paper is to verify the existence of financial constraints for investment in Brazil, an emerging market with growing international visibility.

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Abstract

Purpose

The purpose of this paper is to verify the existence of financial constraints for investment in Brazil, an emerging market with growing international visibility.

Design/methodology/approach

Using panel data methodology and generalized method of moments (GMM), the paper estimates dynamic investment models based on the Euler equation and Tobin's q for a panel data set of 199 Brazilian non-financial firms for the time period 1995-2006.

Findings

Results show that Brazilian firms face financial constraints since their investments depend on internally generated funds. Results are robust to different investment models based on the Euler equation, also controlling for growth opportunities. Significant investment-cash flow sensitivity has been found for the whole sample of firms. Subsamples of firms considered as under financial constraints, according to dividend payout and equity issuance policies, have higher investment-cash flow sensitivity. Investment-cash flow sensitivity of financially constrained firms in Brazil is higher than that in the UK and in Romania, a transition economy.

Originality/value

The results extend empirical evidence of financial constraints in Brazil. The paper contributes to the literature by assessing the firms’ financial constraint status on an annual basis, and by using panel data methodology and GMM to estimate dynamic models of investment that take into account the proposals of the hierarchy of finance theory. In addition, the paper controls for growth opportunities. Capital market imperfections affect firm investment in Brazil and such effects are even stronger for financially constrained firms.

Details

International Journal of Managerial Finance, vol. 10 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Open Access
Article
Publication date: 18 May 2021

Fernanda Pagin, Matheus da Costa Gomes, Rafael Moreira Antônio, Tabajara Pimenta Júnior and Luiz Eduardo Gaio

This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa…

Abstract

Purpose

This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa Balcão, from August 2002 to August 2018, identifying which types of announcement (upgrade, downgrade or the same initial classification) cause variations in prices around the date of disclosure of the rating.

Design/methodology/approach

The event study methodology was applied to verify the market reaction around the announcement dates in a 21-day event window (−10, +10). The market model was used to calculate the abnormal returns (ARs), and subsequently, the accumulated ARs.

Findings

The hypotheses tests allowed to verify that the accumulated ARs are different, before and after the three types of rating announcements (upgrades, downgrades and the same classification); in upgrades, the mean of accumulated ARs increases in the days before the event, while in downgrades, this increase occurs after the event. This paper concluded that the rating announcements have an impact on the return of stock of the Brazilian market and that the market reaction occurs most of the time before the event happens, which indicates that the market can anticipate the information contained in the changes in credit ratings.

Practical implications

The results have considerable implications for portfolio managers, institutional investors and traders. It facilitates investment decision-making in the face of rating classification announcements. Market participants can pay more attention to their investment strategies and asset allocation during periods of risk rating announcements. Additionally, traders can understand the form of investment strategy for superior earnings.

Originality/value

The importance of the study is related to the fact that the results may explain the causes of specific movements in the Brazilian financial market related to a source of information that may or may not be able to influence the decisions of the financial agents that operate in this market. The justification is centred on the idea that, for investors who somehow react to the announcements, it is relevant to understand the impact of rating classifications on companies, as access to such information allows for more conscious decision-making.

Details

Journal of Economics, Finance and Administrative Science, vol. 26 no. 51
Type: Research Article
ISSN: 2077-1886

Keywords

Article
Publication date: 3 August 2012

Joseph J. French and Wei‐Xuan Li

The purpose of this research is to understand the long‐run dynamics between returns, commodity prices, volatility, and US equity investment into Brazil. This research is prompted…

Abstract

Purpose

The purpose of this research is to understand the long‐run dynamics between returns, commodity prices, volatility, and US equity investment into Brazil. This research is prompted by the rapid increase in foreign equity investment into Brazil.

Design/methodology/approach

To address long‐run dynamic nature of the variables, multivariate autoregressive model is fitted for the period of January 1998 to May 2008. To achieve identification of this model, restrictions are imposed based on underlying financial theory and the nature of the data.

Findings

The paper finds consistent with a long literature, that US institutional equity investment is forecasted by past returns on the Brazilian stock index (BOVESPA). The paper also documents the important role of commodity prices in forecasting US equity flows to Brazil, a variable that has not been considered in much of existing literature. Finally, the paper uncovers a strong relationship between US equity flows to Brazil and measures of risk. The paper documents that an unexpected shock to US equity flows increases the volatility of the Brazilian equity market beyond what could be predicted by other variables in the system. The strong joint dynamics among US portfolio equity flows and the risk and return of the Brazilian equity market demonstrates the need for policy makers in Brazil to monitor short‐term portfolio flows.

Originality/value

There is a broad literature on the dynamics of US investment in emerging and developed markets but very little work focuses directly on Brazil. Additionally, this work is one of the first to explicitly consider the role of commodity prices on the dynamics of foreign equity flows to resource rich nations.

Details

Review of Accounting and Finance, vol. 11 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 18 January 2013

Helder Ferreira de Mendonça and Ivando Faria

The purpose of this paper is to make an analysis of the Brazilian experience after the adoption of inflation targeting concerning the effects caused by the new practices of…

Abstract

Purpose

The purpose of this paper is to make an analysis of the Brazilian experience after the adoption of inflation targeting concerning the effects caused by the new practices of transparency and communication in the monetary policy.

Design/methodology/approach

Changes in the financial market's expectations due to monetary policy actions are analyzed based on methodologies proposed by Cook and Hahn and Kuttner. Daily data from transactions in the interbank deposit futures market of the Securities, Commodities and Futures Exchange (BMF&BOVESPA) are used for the period July 1999‐January 2009. Two sub‐periods are also considered: the “maturation period” – the first phase of the effects caused by an increase in central bank transparency; and the “wisdom period” – the second phase in the financial market's perception regarding an environment with more transparency.

Findings

The findings are in consonance with the idea that an increase in central bank transparency and communication improves the efficiency of expectations hypothesis of the term structure of interest rate and the anticipation of changes in the interest rate target.

Originality/value

This study offers some new insights into how central bank communication improves the efficiency of the monetary policy for developing countries, which have adopted inflation targeting.

Details

Journal of Economic Studies, vol. 40 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 23 January 2007

Marcos Alencar Abaide Balbinotti, Cristiane Benetti and Paulo Renato Soares Terra

The purpose of this paper is to report on the systematic translation and content validation method used to produce the Brazilian Portuguese version of the Duke Special Survey on

1782

Abstract

Purpose

The purpose of this paper is to report on the systematic translation and content validation method used to produce the Brazilian Portuguese version of the Duke Special Survey on Corporate Policy by Graham and Harvey.

Design/methodology/approach

In accordance with the requirements for cross‐cultural application of surveys, the paper accounts for obvious differences in language, culture, and the institutional setting and employ well‐known techniques from the field of psychology, such as the use of backtranslation, to ensure faithfulness to the original survey. A panel of experts served as judges in evaluating the clarity of language and the practical pertinence and theoretical dimensions of the questionnaire. Coefficients of content validity for each item and for the instrument as a whole are reported.

Findings

The results illustrate how a questionnaire designed for one country should be rigorously translated and validated prior to use in another country.

Research limitations/implications

Although the content validity of the translated version of the Duke Special Survey on Corporate Policy for use in Brazil is generally satisfactory, a few items may prove to be a challenge for the Brazilian CFO to answer, particularly those questions concerning features that are uncommon in the Brazilian financial market.

Originality/value

This paper explores the field study method in finance by borrowing from the vast experience of psychology research in the rigorous translation and validation of survey instruments. This study also highlights the similarities and differences in the interpretation of questions between emerging and developed markets.

Details

International Journal of Managerial Finance, vol. 3 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 18 April 2017

Karim Marini Thomé, Janann Joslin Medeiros and Bruce A. Hearn

The purpose of this paper is to contribute to the ongoing and unresolved debate in the international business (IB) literature with respect to what drives or impedes multinational…

Abstract

Purpose

The purpose of this paper is to contribute to the ongoing and unresolved debate in the international business (IB) literature with respect to what drives or impedes multinational company (MNC) success in emerging markets, focusing specifically on the impact of institutional conditions on subsidiary performance.

Design/methodology/approach

In the understanding that greater attention to different institutional settings and their diversity has much to offer theory-building in the IB area, this panel study examines the influence of institutional distance on the return on assets (ROA) of 399 foreign subsidiaries in a previously understudied host market, that of Brazil during the period from 2008 to 2011. Regression analysis was carried out on panel data using weighted least squares as estimator.

Findings

Similar to research conducted in other national contexts, results revealed significant correlation between institutional distance and firm performance measured by ROA. Unlike previous research, however, these correlations were positive: the greater the institutional distance, the better the performance. Both normative distance and regulatory distance positively influenced ROA, raising questions with regard to the concept of institutional distance, its operationalization and influence.

Originality/value

The paper is of value in showing the institutional distance and the performance of foreign subsidiaries with a positive relationship in an emerging market (Brazil) using a panel perspective rather than the more usual sectional perspective.

Details

International Journal of Emerging Markets, vol. 12 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 28 February 2022

Edson Zambon Monte

The main goal of this paper is to investigate whether there is long-memory behavior in the CBOE Brazil ETF volatility index (named here VIXBR). As structural breaks may create a…

Abstract

Purpose

The main goal of this paper is to investigate whether there is long-memory behavior in the CBOE Brazil ETF volatility index (named here VIXBR). As structural breaks may create a spurious long-range dependence, the presence of structural breaks is also gauged.

Design/methodology/approach

The study considers the period from October 2011 to March 2021, using daily data. To test the long-memory behavior, three empirical approaches are adopted: GPH, ELW and robust GPH (RGPH) estimator. To estimate the structural break points adopted to date the subsamples, the ICSS algorithm is used.

Findings

Results considering the total period (TP) and subsamples show that the breaks did not create a spurious long-memory behavior and together with the rolling estimation, reveal strong evidence of the long-range dependence in the CBOE Brazil ETF volatility index. The higher degree of persistent of the VIXBR series suggests an extended period of increased uncertainty that agents need consider when making their investment decision.

Research limitations/implications

As possible extension of this study is to investigate the behavior of long memory and structural breaks for different frequencies (weekly, monthly, among others).

Practical implications

The presence of long-range dependence in the CBOE Brazil ETF volatility index reveals that the past information is important for the predictability of risks, and therefore, can help to protect against market risks, which has important implications regarding the future decisions of economic agents (for example, policy makers and investors).

Originality/value

Brazil is an emerging capital market (ECM) that has attracted a great deal of attention from investors and investment funds seeking to diversify its assets. This paper contributes to the empirical financial literature, by studying the long-memory behavior of the CBOE Brazil ETF volatility index, considering possible structural breaks. To the best of knowledge, this has not been done so far.

Details

International Journal of Emerging Markets, vol. 18 no. 11
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 8 February 2022

Veli Yilanci and Ugur Korkut Pata

This study aims to investigate the impact of the rise in coronavirus disease 2019 (COVID-19) cases on stock prices, exchange rates and sovereign bond yields in both Brazil and…

Abstract

Purpose

This study aims to investigate the impact of the rise in coronavirus disease 2019 (COVID-19) cases on stock prices, exchange rates and sovereign bond yields in both Brazil and India.

Design/methodology/approach

The authors employ the wavelet transform coherence (WTC) and continuous wavelet transform (CWT) techniques on daily data from March 17, 2020 to May 8, 2021.

Findings

The findings show that COVID-19 has no impact on exchange rates but slightly increases sovereign bond yields from 2021 onwards. In contrast, the effect of COVID-19 on stock prices is quite high in both countries. There is a considerable consistency between COVID-19 cases and stock prices across different time–frequency dimensions. The rise in COVID-19 cases has an increasing effect on stock prices in Brazil and India, especially in the high-frequency ranges.

Originality/value

As far as the authors know, no prior study has simultaneously analyzed the effects of the COVID-19 pandemic on exchange rates, stock prices and sovereign bonds in Brazil and India.

Details

International Journal of Emerging Markets, vol. 18 no. 11
Type: Research Article
ISSN: 1746-8809

Keywords

1 – 10 of over 8000