Governança corporativa, environmental, social and governance e financial distress: uma análise multipaíses, nacional e regional

Abstract

Companies experience financial distress (FD) when they have insufficient liquidity to meet their financial obligations. This thesis analyzes the role of corporate governance and ESG (Environmental, Social, and Governance) practices in reducing the likelihood of financial distress in Brazilian and Latin American firms. The study was divided into two essays as follows: Essay 1 analyzes the relationship between ownership concentration, board composition, and state ownership with financial distress for Brazilian firms in the period from 2010 to 2022, while Essay 2 analyzes the relationship between ESG performance (overall score and its three pillars) and financial distress for Latin American firms, also in the period from 2010 to 2022. Essay 1 involves two approaches: national and regional. The regional approach investigated whether Brazilian companies with plants, businesses, or subsidiaries in the Triângulo Mineiro e Alto Paranaíba (TMAP) and southern Goiás regions have lower levels of financial distress. The sample consisted of 360 companies and 4,308 observations/year between 2010 and 2022. In addition to corporate governance mechanisms, Essay 1 also analyzed the relationship between auditing, COVID-19, and regionality with the level of FD. The method adopted was logistic regression, and the proxy for financial distress was based on Altman's ZScore. The main results were that when a company is state-owned, has high shareholder concentration, and CEO duality, it is more likely to have financial distress. A negative relationship with FD was found for the audit variables and COVID-19. Essay 2 used the multilevel regression method for a sample of 11,724 observations/year, from 2010 to 2022. The aim of this essay was to analyze the relationship between ESG and financial distress in Latin America, as well as its effects on performance, explaining the possible relationships between the new agenda of corporate social responsibility criteria and firms' financial constraints. The study analyzed the relationship between ESG practices and the financial distress of Latin American companies and whether these two aspects together can affect the firm's performance (ROA). A proxy was created to measure the effects of the COVID-19 pandemic period (2020 to 2022) on financial distress. The results show a statistically positive and significant relationship between the ESG score and the likelihood of financial distress, indicating that the greater the social, environmental, and governance responsibility of firms, the greater their likelihood of financial distress. The same behavior was also observed for the environmental, social, and governance scores when analyzed individually. Finally, the study contributed to the literature on monitoring the risk of bankruptcy, business prosperity, and the prevention of financial restrictions, with important implications for the financial stability of Brazilian and Latin American firms.