Research Handbooks in Corporate Law and Governance series
Edited by Jennifer G. Hill and Randall S. Thomas
Chapter 22: Corporate control and governance after a decade from ‘Novo Mercado’: changes in ownership structures and shareholder power in Brazil
Brazilian capital markets have undergone fascinating developments in the past ten years. After centuries of state domination of capital markets regulation that was associated with poor market performance (Gorga 2006, 2009: 489–492; Levy 1977; Trubek 1971), BM & FBovespa, the main Brazilian stock exchange, finally took steps towards developing private regulation of the market at the beginning of 2000. It created three special listing segments – Level 1, Level 2 and Novo Mercado – with more stringent corporate governance requirements than the ones provided by Brazilian corporate law. A company’s voluntary adherence to any of these listing segments requires compliance with BM & FBovespa’s set of corporate governance practices for each one. Novo Mercado adopts the most stringent rules, followed by Level 2 and then Level 1. The pre-existing traditional market required no additional compliance beyond state law. Once compliance with better governance was voluntary, established companies listed in the traditional market could choose whether to migrate to the higher listing standards or to continue to be regulated by the existing system.
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