The tag along concern for the shareholder and firm’s wealth - an empirical brazilian investigation of tobin’s q ratio and dividends

Abstract

The purpose of this research was to investigate how companies granting tag along rights to minority shareholders, affect the value generation of the company (measured by Tobin’s Q - Q) as well as wealth of minority shareholders (measured by payout - PAY). Tag along is the partial or full extension, to all other shareholders of the companies, the same conditions obtained by the controllers on the sale of control of a company. To study this, we collected and analyzed non-financial data of 613 Brazilian companies listed on the BM&F Bovespa during the years 1995-2014. For the analysis we used regression with panel data. The hypothesis for the research of the theory of corporate governance and considers the risks and the potential for conflicts that the ownership structure of Brazilian companies concentrated. The results showed a positive relationship between granting tag along and Q ratio and a negative relationship between the granting of tag along and payout - PAY. Thus, the implication of granting tag along as a corporate governance instrument is positively related to the firm assets in relation to its market value and negatively with the return to minority shareholders in the form of dividends and interest on net equity (JCP). For further studies, we suggest an analysis of other countries that use the corporate governance practice to grant tag along to its shareholders as well as the analysis of this tag along distribution ratio taking into account the influence of participation of companies in each level of corporate governance of BM&F Bovespa stock exchange.