Legitimacy, corporate governance and performance in brazilian stock exchange

Abstract

The aim of this paper is to evaluate how legitimacy affects the market value of Brazilian stock market companies. Specifically, we analyze how the adherence to the “Novo Mercado” moderates the effect of legitimacy on the market value. From the organizational institutionalism framework, we evaluated by means of panel data, 348 organizations between 2002 and 2007, generating a total of 1357 observations. We found that adherence to the “Novo Mercado”, the prestige of board members and reputation significantly affects the market value. When sectioned organizations according to the level of governance, we see that the cultural-cognitive and normative legitimacy origins significantly affected the market value in groups with lower level of governance, while among the companies in the “Novo Mercado”, the influence was not significant. From these results, we conclude that legitimacy is an important factor explaining the performance variability of publicly traded companies in which the presence in governance premium listing conditioned the influence of other sources of legitimacy in market value.