Corruption and market value: effects of the Lava Jato Operation on the Brazilian Stock Market
DOI:
https://doi.org/10.16930/2237-7662/rccc.v17n51.2626Keywords:
Corruption, Market value, Lava Jato Operation.Abstract
This paper aims to identify the effects of the disclosure of corruption events on the market values of companies listed on the Brazilian Stock Exchange. For this purpose, we applied the event studies methodology to evaluate the influence of exposing the phases of one of the most extensive Brazilian anti-corruption operations - the Lava Jato Operation - on the cumulative abnormal return of shares, both of the companies cited in the investigations (direct involvement) and of those listed in the same segments as the cited companies. Results indicate that the Lava Jato Operation reduced the market values of the companies directly involved in the corruption scandals above market variations. For the other companies in the concerned segments, there was a positive effect on the cumulative abnormal returns. Such results suggest that the onset of anti-corruption operations such as the Lava Jato Operation has the potential to reduce pricing differences that exist between companies that directly participate in fraudulent contracts and other companies in the same segments. This pricing adjustment may be associated with the correction made by the market due to losses in competiveness caused by unfair competition.References
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