Corporate Values and Stock Performance of Latin American Banks

16 Pages Posted: 23 Jan 2007

See all articles by Otavio Ribeiro de Medeiros

Otavio Ribeiro de Medeiros

Universidade de Brasília (UnB) - Campus Universitario Darcy Ribeiro

Maria Lizete Da Silveira

Banco do Brasil

Date Written: March 27, 2007

Abstract

We address the question of whether the quality of corporate values contribute significantly to improve the stock performance of banks listed on emerging stock markets in six Latin-American countries (Argentina, Brazil, Chile, Colombia, Peru and Mexico). The corporate values analyzed are ethics, corporate governance, social responsibility, sustainability, and transparency. Stock performance is evaluated considering stock volatility, liquidity, and abnormal stock returns. The research design involves linear cross-section multiple regressions where the dependent variable is stock performance and the explanatory variables are corporate values, together with a set of control variables. We show that corporate values as a single average index show a negative relationship with stock return volatility, as expected. Individually, ethics, social responsibility, sustainability and transparency also show negative relationships with stock volatility, whereas corporate governance does not. We also find that ethics reduces liquidity and that there is no significant relationship between the corporate values studied and stock abnormal returns.

Keywords: corporate values, ethics, corporate governance, social responsibility, sustainability, transparency, Latin America, banks, volatility, liquidity, abnormal returns, stock market

JEL Classification: C21, C51, G14, G15, G21, G34, M14, M41

Suggested Citation

de Medeiros, Otavio Ribeiro and Da Silveira, Maria Lizete, Corporate Values and Stock Performance of Latin American Banks (March 27, 2007). Available at SSRN: https://ssrn.com/abstract=958897 or http://dx.doi.org/10.2139/ssrn.958897

Otavio Ribeiro De Medeiros (Contact Author)

Universidade de Brasília (UnB) - Campus Universitario Darcy Ribeiro

Maria Lizete Da Silveira

Banco do Brasil ( email )

Brasilia, Distr. Federal
Brazil

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