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Corporate governance and Ownership Structures in Brazilian Multinationals

Corporate governance and Ownership Structures in Brazilian Multinationals. Ownership Matters! (Session# 141304). Emerging Market Global Players: Home-Country Institutions and Corporate Governance Hsia Hua Sheng Hsia.sheng@fgv.br Professor of International Financial Management

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Corporate governance and Ownership Structures in Brazilian Multinationals

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  1. Corporate governanceandOwnershipStructures in Brazilian Multinationals Ownership Matters! (Session# 141304) Emerging Market Global Players: Home-Country Institutions and Corporate Governance Hsia Hua Sheng Hsia.sheng@fgv.br Professor of International Financial Management (Fundacao Getulio Vargas, FGV/ EAESP), Brazil

  2. The Effects of Institutions on Brazilian MNEs Corporate Governance Institutions Corporate Governance • Inefficient Capital Markets • Less Protection to Investor • Inecffective Legal Systems • Local Resources are not Freely Available • Poor Supply of Qualified Labor • High ownership concentration • "Complex” Pyramidal Schemes • The presence of Shareholders Agreements • Government as Minority Shareholders • Brazilian National Bank of Economic Development Participations (BNDESPar) • Government Pension Funds • Families Business Group are the largest shareholder

  3. Ownership Structure – Example (Grendene – 2011) Agreement % Largest Shareholder - Total Voting Shares 24%;32% 30%;40% 26%;0% 20%;28% 11%;15% 12%;16% 3 9%;13% 30%;40% 4%;6% 3%;4% 11%;15% 6%;8% 1%;2% We have to consider the shareholders agreement and break the pyramidal structures to have a more accurate view of the ownership structure of the Brazilian firmas 3%;4% 2%;3% 1%;2% * x% ; y% = % total voting shares ; % in the control

  4. Ownership Structure – Example (Usiminas – 2011) 12%;0% 10%;0% 1%;2% 4%;6% 5%;8% 5%;8% 2%;3% 24%;36% 1%;1% 12%;0% Agreement 7%;10% 17%;26% % Largest Shareholder - Total Voting Shares Legend Family Civita 4 Pension Funds Foreign Investors Other Ultimate Shareholders % - Control % - Voting Shares We have to consider the shareholders agreement and break the pyramidal structures to have a more accurate view of the ownership structure of the Brazilian firmas

  5. Ownership Structure – Example (JBS – 2011) Example of a complex “pyramidal structure” Other Ultimate Shareholders Family Batista Development Banks Legend Family Bertin Foreign Investors

  6. Ownership Effect on Internationalization Brazilian Context Government Participation (Positive Relationship ) Family Business (Positive Relationship ) Ownership Concentration (Negative Relationship ) Internationalization

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