Corporate governance and volatility: an analysis for the three differentiated market levels on B3 using GARCH models

Abstract

The adoption of corporate governance practices by companies aims to provide greater transparency in the disclosure of economic and financial results to its shareholders, as well as in reducing agency conflicts, which implies better business management. This research project aims to assess whether the implementation of corporate governance practices affects the returns volatility (or risk) pattern of Brazilian companies that have their shares traded at the differentiated levels of corporate governance of B3. It will consider conditional variance models of the GARCH family to estimate the conditional variance based on data that comprise the period before and after the listing of these companies in the differentiated markets, in order to verify if there is a change in the stock volatility pattern. In addition, this analysis will include companies with shares traded in the three levels of governance of B3, Level 1, Level 2 and New Market to measure whether there is a distinction between the effects of governance practices on volatility as differentiated listing segment.