A study on the relationship between preferred shares and market value of brazilian companies

Abstract

The Brazilian stock market is characterized by companies with large concentration of power in the hands of a few controlling shareholders. The existence of preferred shares without voting rights reinforces called agency conflict among controlling shareholders and minority shareholders, entailing ownership structures in which control can be exercised with a relatively small share of the total shares issued by companies. The concentration of ownership would allow the possibility of expropriation of minority shareholders' rights. Several empirical studies have been conducted over the past few years with the objective of evaluating the influence of the structure of ownership of shares on the market value of companies. In this context, the present work aims to bring new contributions, with emphasis on the participation of preferred shares in the ownership structure. In this study, using a sample of 121 companies traded on the Brazillian Stock Exchange, BM&FBOVESPA, from test mean difference, rejects the hypothesis of equal market value among companies that have only common shares in its ownership structure, in relation to that have both types, common and preferred shares. Continuing, using linear regression models, there is a negative relationship was statistically significant between the market value of companies and the variables used to characterize the structure of ownership, in particular to the difference between the percentage of participation of non-controlling shareholders total preferred shares and percentage ownership of controlling shareholders in total shares.