Resumo

A recent Brazilian case of corruption involved the company JBS - the global leader in animal protein processing - and politicians. On the 17th of May of 2017 the Brazilian newspaper O Globo disclosed details about the plea bargain testimony of Joesley and Wesley Batista, respectively the chairman and chief executive of the meat company JBS, that provided evidence against prominent politicians involved in corruption. Mr. Batista recorded a conversation that he had with the president of Brazil - Michel Temer - that indicates involvement of the president in corruption (The New York Times, 2017)

Considering the possibility of announcements of relevant facts cause abnormal return in the stock market, what is the relation between corporate and government scandals occurred in Brazil and the behavior of stock prices of Brazilian companies traded in the American exchange market? The aim of this study is to analyze how the disclosure of the involvement of the company JBS and Brazilian politicians in corruption affected the stock pricing of Brazilian companies that operate in the American stock market by issuing ADRs.

It was provided a review about the Efficient-Market Hypothesis (Fama, 1970) indicating some studies that support and others that desagrees with the idea of market efficiency. The literature review also references prior research that used event study to analyze stock price behavior and pointed some studies about the impact of corruption for the financial market. Finally there is a narrative about JBS’s case.

The methodology adopted was the event study and for that, the period from November 12th, 2016 to May 22nd, 2017 was analyzed, the event window considered 11 days (-5 to +5). The sample consisted of 29 Brazilian companies that are traded in the New York Stock Exchange. The data were collected in Economatica database in a daily frequency

According to the finding, there was a considerable loss of value on the day after the event (on average 15%). Five days after the event there was a cumulative post-event loss of 12%. The return of the companies diverged significantly in the Brazilian sample studied. Some companies during the 5 days lost 25% of the value of their shares – por example Gol - but others had a minimum loss of 1%, for example Vale. When the methodology was applyed for an American sample of companies in the same period, the results showed that there was no change in the stock price of American companies.

The study opposes the Efficient-Market Hypothesis (Fama, 1970), since abnormal returns were found and there was not a rapid adjustment of prices after the announcement of the fact. Some companies had higher impact than others, indicating that the sectors of performance, prior trust and image of these companies may affect the reliability of the investor and could mitigate the impact that the current Brazilian political scenario may have on them.

Fama, E. F. (1970). Efficient Capital Markets: A review of theory and empirical works. The Journal of Finance. v. 25, n. 2, p. 383-417, may 1970. Kimura, H., Basso, L. F. C., & Krauter, E. (2006). Paradoxos em finanças: teoria moderna versus finanças comportamentais. Revista de Administração de Empresas, 46(1), 41-58.