Correspondence: Alexandre Di Miceli da Silveira, School of Economics, Management and Accounting of the University of São Paulo (FEA/USP), R.1N HAMBU, 635 AP.131, CEP 04520-012, São Paulo, Brazil. E-mail: alexfea@usp.br

¹is a professor at the School of Economics, Management and Accounting of University of São Paulo (FEA/USP), Vice President of the Brazilian Society of Finance, Executive Coordinator of CEG – Center for Corporate Governance Research of Fipecafi, and Senior Researcher at IBGC – Brazilian Institute of Corporate Governance. He holds a PhD and an MS in Finance from the School of Economics, Management and Accounting of University of São Paulo (USP), and received 'Distinction and Honor' for his PhD and MS theses.

²is a graduate student at Federal University of Ilheus. He has published several works on financial accounting and has an undergraduate degree in accounting from FEA/USP).

Received 20 August 2009; Revised 20 August 2009; Published online 22 October 2009.

Abstract

This article investigates the impact on share prices when news released on the specialized media indicates that the interests of controlling and minority shareholders groups diverge. Methodologically, we analyze 24 announcements of conflicts between shareholder groups in Brazil using two event study methodologies. We find strong support for our hypothesis that such news constitutes a proxy for relevant agency costs taking place, leading to a higher perception of risk and reduced share price. To our knowledge, this is the first article to estimate the impact of specific agency costs between controlling and minority shareholders in an environment characterized by concentrated ownership structures. The article is relevant for all capital markets' investors, as well as for analysts and other capital markets' agents. For policy makers and practitioners, our results provide evidence on the potential corporate value loss owing to conflicts between shareholders groups. As a result, they reinforce the argument for the adoption of good corporate governance practices, in order to avoid corporate value destruction resulting from problems between different shareholding groups. The main author is a professor at the School of Economics, Management and Accounting of University of São Paulo (FEA/USP) in Corporate Governance courses at both graduate and undergraduate level. In addition, he is Executive Coordinator of the Center for Corporate Governance Research of Fipecafi (CEG – www.ceg.org.br), Vice-President of the Brazilian Society of Finance (www.sbfin.org.br) and Senior Researcher of the Brazilian Institute of Corporate Governance (IBGC – www.ibgc.org.br). He is author of several books and articles on corporate governance, and writes a monthly column on corporate governance issues for Capital Aberto magazine, one of the most prominent capital markets' magazines in Brazil, making him well known among the corporate governance community in Brazil and Latin America. All persons involved with capital markets, media and policy makers should take note of these results, as most have corporate environments characterized by controlling shareholders, and their relationship with minority shareholders can be a potential source of relevant value destruction.