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Corporate Governance and Information Incorporation Speed: Lead-Lag between the IGC and IBrX

Author

Listed:
  • José Carneiro da Cunha Oliveira Neto

    (PPGA/Universidade de Brasília)

  • Otávio Ribeiro de Medeiros

    (PPGA/UnB)

  • Thiago Bergmann de Queiroz

Abstract

Based on intraday data with a frequency of 15 minutes, the present study investigates the relationship between the high corporate governance market (IGC) and the traditional market (IBrX). The hypothesis tested is that a higher level of corporate governance reduces the cost associated to incorporating new information to asset prices, and so firms with higher governance incorporate information faster. The co-integration relationship between the time series was tested using the Engle-Granger method in two stages. The vector error correction model (VECM) and the Granger causality test do not permit the rejection of the hypothesis of faster incorporation of information for the high governance market prices. To estimate the VECM we used a bivariate GARCH BEKK model. The results suggest that the IGC finds its equilibrium price more rapidly and that the IBrX converges to the equilibrium relationship determined by the IGC.

Suggested Citation

  • José Carneiro da Cunha Oliveira Neto & Otávio Ribeiro de Medeiros & Thiago Bergmann de Queiroz, 2012. "Corporate Governance and Information Incorporation Speed: Lead-Lag between the IGC and IBrX," Brazilian Review of Finance, Brazilian Society of Finance, vol. 10(1), pages 149-172.
    • Handle: RePEc:brf:journl:v:10:y:2012:i:1:p:149-172
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    More about this item

    Keywords

    Corporate Governance; Efficient Markets Hypothesis; GARCH-BEKK; Lead-Lag; ; Corporate Governance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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