THE Companies Participating in the Corporate Sustainability Index and the Restrictive Financial Debt Clauses
DOI:
https://doi.org/10.22478/ufpb.2318-1001.2021v9n1.52732Abstract
Objective: The research aims to analyze whether Brazilian companies included in the BM&FBOVESPA Corporate Sustainability Index are more likely to have restrictive financial clauses in debt contracts.
Rationale: Corporate social responsibility is correlated with the financial performance of companies as they are associated with profitability and indebtedness (Cochran & Wood, 2017), where companies included in the BM&FBOVESPA Corporate Sustainability Index have less restrictions on financing and less short-term bank debt. (Andrade, Bressan, Iquaipaza & Moreira, 2012) and, companies with long-term bank debt concentration are more susceptible to restrictive financial clauses (Silva, 2008).
Method: The sample consisted of 1,550 unbalanced panel observations for 233 publicly-traded Brazilian non-financial companies in the period from 2010 to 2018, with data taken from the Economática database, BM&FBOVESPA website and explanatory notes from the companies. Mean tests, Pearson correlation and MQO linear regression analysis were used through the logit controlling model per year.
Results: It was observed that companies included in the BM&FBOVESPA Corporate Sustainability Index are more likely to have restrictive financial clauses in their bank debt contracts, validating the research hypothesis.
Contributions: The evidence complement the literature on corporate social responsibility by relating to factors that inhibit risks in financial operations and assisting companies included in the Corporate Sustainability Index to plead with financial institutions not to include restrictive financial clauses in fundraising.
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References
Andrade, L. P.; Bressan, A. A.; Iquaipaza, R. A, & Moreira, B. C. M. (2012). Determinantes de Adesão ao Índice de Sustentabilidade Empresarial da BM&FBOVESPA e sua Relação com Valor da Empresa. Revista Brasileira de Finanças, 11(2), 181-213.
Artiach, T.; Lee, D.; Nelson, D., & Walker. J (2010). The determinants of corporate sustainability performance. Accounting & Finance, 50(1), 31-51. https://doi.org/10.1111/j.1467-629X.2009.00315.x
Beiruth, A. X.; Fávero, L. P. L.; Murcia, F. D. R.; Almeida, J. E. F., & Brugni, T. (2017). Structural changes in covenants through the adoption of IFRS in Brazil. Accounting Forum, 41, 147-160. http://dx.doi.org/10.1016/j.accfor.2017.06.004
Beneish, D. M., & Press, E. (1993). Costs of Technical Violation of Accounting-Based Debt-Covenants. The Accounting Review, 68(2), 233-257.
BM&FBOVESPA. ISE – Índice de Sustentabilidade Empresarial. Bolsa de Valores, Mercadorias e Futuros de São Paulo. Disponível em: http://www.bmfbovespa.com.br/pt_br/produtos/indices/indices-de-sustentabilidade/indice-de-sustentabilidade-empresarial-ise.htm. Acesso em: 26 abr. 2020.
Bradley, M., & Roberts, M. R. (2015). The Structure and Pricing of Corporate Debt Covenants. Quarterly Journal of Finance, 5(2), 155-201. https://doi.org/10.1142/S2010139215500019
Brammer, S.; Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35(3), 97-116. https://doi.org/10.1111/j.1755-053X.2006.tb00149.x
Borges, L.F.X. (1999). Covenants: Instrumentos de Garantia em Project Finance. Revista do BNDES, 5(9), 105-121. Recuperado de https://web.bndes.gov.br/bib/jspui/handle/1408/13823
Calegari, I. P.; Gonçalves, R. S.; Serrano, A. L. M., & Rodrigues, J. M. (2016). Efeitos da Reputação Corporativa no Custo de Capital Próprio em Empresas Brasileiras Listadas. Revista Universo Contábil, 12(1), 178-198. https://doi:10.4270/ruc.2016110
Cheng, B.; Ioannou, I., & Serafeim, G. (2013). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1),1-23. https://doi.org/10.1002/smj.2131.
Cheung, A. W. K. (2011). Do stock investors value corporate sustainability? Evidence from an event study. Journal of Business Ethics, 99(2), 145-165. https://doi.org/10.1007/s10551-010-0646-3
Christensen, H. B., & Nikolaev, V. V. (2012). Capital versus performance covenants in debt contracts. Journal of Accounting Research, 50(1), 75-116. https://doi.org/10.1111/j.1475-679X.2011.00432.x
Cochran, P. L., & Wood, R. A. (2017). Corporate Social Responsability and Financial Peformance. Academy of Management Journal, 27(1), https://doi.org/10.5465/255956
Comitê de Pronunciamentos Contábeis - CPC 26 (R1) (2011). Dispõe sobre Apresentação das Demonstrações Contábeis. Brasília. 2011. Recuperado em 09 de julho, 2019, de http://static.cpc.aatb.com.br/Documentos/312_CPC_26_R1_rev%2013.pdf
Costello, A. M., & Moerman, R. W. (2011). The Impact of Financial Reporting Quality on Debt Contracting: Evidence from Internal Control Weakness Reports. Journal of Accounting Research, 49(1), 97-136. https://doi.org/10.1111/j.1475-679X.2010.00388.x
Cunha, F. A. F. S., & Samanez, C. P. (2013). Performance Analysis of Sustainable Investments in the Brazilian Stock Market: A Study About the Corporate Sustainability Index (ISE). Journal of Business Ethics, 117(1), 19-36. http://doi.org/10.1007/s10551-012-1484-2
Demerjian, P. R. (2017). Uncertainty and debt covenants. Review of Accounting Studies, 22(3), 1156-1197. https://doi.org/10.1007/s1114
Demiroglu, C., & James, C. M. (2010). The Information Contento f Bank Loan Covenants. The Review of Financial Studies, 23(10), 3700-3737. https://www.jstor.org/stable/40865573
Franz, D.; Hassabelanby, R., & Lobo, G. J. (2014). Impact of proximity to debt covenant violation on earnings management. Review Accounting Studies, 19, 473–505. https://doi.org/10.1007/s11142-013-9252-9
Gu, Z.; Lee, C. J., & Rosett, J. G. (2005). What determines the variability of accounting accruals. Review of Quantitative Finance And Accounting, 24, 313-334. https://doi.org/10.1007/s11156-005-6869-1
Guenster, N.; Bauer, R.; Derwall, J., & Koedijk, K. (2011). The Economic Value of Corporate Eco-Efficiency. European Financial Management, 17(4), 679-704. https://doi.org/10.1111/j.1468-036X.2009.00532.x
Iatridis, G., & Kadorinis, G. (2009). Earnings management and firm financial motives: A financial investigation of UK listed firms. International Review of Financial Analysis, 18, 164-173. https://doi.org/10.1016/j.irfa.2009.06.001
Inamura, Y. (2009). The determinants of accounting based covenants in public debt contracts. Journal of International Business Research, 8, 1-15.
Lo, S. F., & Sheu, H. J. (2007). Is Corporate Sustainability a Value‐Increasing Strategy for Business? Corporate Governance An International Review, 15(2), 345-348. https://doi.org/10.1111/j.1467-8683.2007.00565.x
López, V.; Garcia, A., & Rodriguez, L. (2007). Sustainable Development and Corporate Performance: A Study Based on the Dow Jones Sustainability Index. Journal of Business Ethics, 75, 285-300. https://doi.org/10.1007/s10551-006-9253-8
Lourenço, I C., & Branco, M. C. (2013). Determinants of corporate sustainability performance in emerging markets: the Brazilian case. Journal of Cleaner Production, 57(15), 134-141. https://doi.org/10.1016/j.jclepro.2013.06.013
Machado, M. R.; Machado, M. A. V, & Corrar, L. J. (2009). Desempenho do Índice de Sustentabilidade Empresarial (ISE) da Bolsa de Valores de São Paulo. Revista Universo Contábil, 5(2), 24-38. https://doi:10.4270/ruc.2009211
Masse, I.; Hanrahan, R.; Kushner, J., & Martinello, F. (2000). The effect of additions to or deletions from the ISE 300 Index on Canadian share prices. Canadian Journal of Economics, 33(2), 341-360. https://doi.org/10.1111/0008-4085.00019
Nini, G.; Smith, D. C., & Sufi, A. (2009). Creditor control rights and firm investment policy. Journal of Financial Economics, 92(3), 400-420. https://doi.org/10.1016/j.jfineco.2008.04.008
Nikolaev, V.V. (2010). Debt Covenants and Accounting Conservatism. Journal of Accounting Research, 48(1), 137-175. https://doi.org/10.1111/j.1475-679X.2009.00359.x
Nunes, J. G.; Teixeira, A. J. C.; Nossa, V., & Galdi, F. C. (2010). Análise das Variáveis que Influenciam a Adesão das Empresas ao Índice BM&FBOVEPA de Sustentabilidade Empresarial. Revista de Administração e Contabilidade de Unisinos, 7(4), 328-340. https://doi:10.4013/base.2010.74.06
Orlitzky, M.; Schmidt, F. L., & Rynes, S. L. (2003). Corporate Social and Financial Performance: A Meta-Analysis. Organization Studies, 24(3), 403-441. https://doi.org/10.1177/0170840603024003910
Orsato, R. J.; Garcia, A.; Mendes, Wesley. S.; Simonetti, R., & Monzoni, M. (2015). Sustainability indexes: why join in? A study of the 'Corporate Sustainability Index (ISE)' in Brazil, Journal of Cleaner Production, 96, 161-171. http://dx.doi.org/10.1016/j.jclepro.2014.10.071
Peixoto, F. M.; Pains, M. B.; Araújo, A. A., & Guimarães, T. M. (2016). Custo de Capital, Endividamento e Sustentabilidade: Um Estudo no Mercado de Capitais Brasileiro no período de 2009 a 2013. Revista de Contabilidade, Administração e Economia, 15(1), 39-66. http://dx.doi.org/10.18593/race.v15i1.6281
Press, E., & Weintrop, J. (1991). Financial Statement Disclosure of Accounting-Based Debt Covenants. Accounting Horizons. 5(1), 64-74
Prilmeier, R. (2017). Why do loans contain covenants? Evidence from lending relationships. Journal of Financial Economics, 123(3), 558-579. https://doi.org/10.1016/j.jfineco.2016.12.007
Romano, P. R.; Ernel, M. D. A, & Mol, A. L. R. (2016). Características das Empresas Brasileiras Pertencentes ao Índice de Sustentabilidade Empresarial (ISE) da BM&FBOVESPA no Périodo de 2010 a 2013 e seu Retorno Anormal. Revista Universo Contábil, 12(2), 06-20. https://doi:10.4270/ruc.2016211
Silva, A. H. C. (2008). Escolha de práticas contábeis no Brasil: uma análise sob a ótica da hipótese dos covenants contratuais. Tese (Doutorado em Ciências Contábeis) – Programa de Pós Graduação em Ciências Contábeis, Universidade de São Paulo, São Paulo. Recuperado e 20 abril, 2019, de http://www.teses.usp.br/teses/disponiveis/12/12136/tde-16012009-120147/pt-br.php
Silva, E. H. D. R.; Lima, E. P.; Costa, S. E. G., & Sant’Anna, Â, M, O. (2015). Análise comparativa de rentabilidade: um estudo sobre o Índice de Sustentabilidade Empresarial. Gestão & Produção, 22(4), 743-754. http://dx.doi.org/10.1590/0104-530X1889-14
Texeira, E. A.; Nossa, V., & Funchal, Bruno (2010). O Índice de Sustentabilidade Empresarial (ISE) e os impactos no endividamento e na percepção de risco. Revista de Contabilidade & Finanças, 22(55), 29-44.
Watts, R. L., & Zimmerman, J. L. (1990). Positive Accounting Theory: A ten year perspective. The accounting review, 65(1), 131-156.
Watts, R. L., & Zimmerman, J. L (1978). Towards a positive theory of the determination of accounting standards. The Accounting Review, 53(1), 112-134.
Artiach, T.; Lee, D.; Nelson, D., & Walker. J (2010). The determinants of corporate sustainability performance. Accounting & Finance, 50(1), 31-51. https://doi.org/10.1111/j.1467-629X.2009.00315.x
Beiruth, A. X.; Fávero, L. P. L.; Murcia, F. D. R.; Almeida, J. E. F., & Brugni, T. (2017). Structural changes in covenants through the adoption of IFRS in Brazil. Accounting Forum, 41, 147-160. http://dx.doi.org/10.1016/j.accfor.2017.06.004
Beneish, D. M., & Press, E. (1993). Costs of Technical Violation of Accounting-Based Debt-Covenants. The Accounting Review, 68(2), 233-257.
BM&FBOVESPA. ISE – Índice de Sustentabilidade Empresarial. Bolsa de Valores, Mercadorias e Futuros de São Paulo. Disponível em: http://www.bmfbovespa.com.br/pt_br/produtos/indices/indices-de-sustentabilidade/indice-de-sustentabilidade-empresarial-ise.htm. Acesso em: 26 abr. 2020.
Bradley, M., & Roberts, M. R. (2015). The Structure and Pricing of Corporate Debt Covenants. Quarterly Journal of Finance, 5(2), 155-201. https://doi.org/10.1142/S2010139215500019
Brammer, S.; Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35(3), 97-116. https://doi.org/10.1111/j.1755-053X.2006.tb00149.x
Borges, L.F.X. (1999). Covenants: Instrumentos de Garantia em Project Finance. Revista do BNDES, 5(9), 105-121. Recuperado de https://web.bndes.gov.br/bib/jspui/handle/1408/13823
Calegari, I. P.; Gonçalves, R. S.; Serrano, A. L. M., & Rodrigues, J. M. (2016). Efeitos da Reputação Corporativa no Custo de Capital Próprio em Empresas Brasileiras Listadas. Revista Universo Contábil, 12(1), 178-198. https://doi:10.4270/ruc.2016110
Cheng, B.; Ioannou, I., & Serafeim, G. (2013). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1),1-23. https://doi.org/10.1002/smj.2131.
Cheung, A. W. K. (2011). Do stock investors value corporate sustainability? Evidence from an event study. Journal of Business Ethics, 99(2), 145-165. https://doi.org/10.1007/s10551-010-0646-3
Christensen, H. B., & Nikolaev, V. V. (2012). Capital versus performance covenants in debt contracts. Journal of Accounting Research, 50(1), 75-116. https://doi.org/10.1111/j.1475-679X.2011.00432.x
Cochran, P. L., & Wood, R. A. (2017). Corporate Social Responsability and Financial Peformance. Academy of Management Journal, 27(1), https://doi.org/10.5465/255956
Comitê de Pronunciamentos Contábeis - CPC 26 (R1) (2011). Dispõe sobre Apresentação das Demonstrações Contábeis. Brasília. 2011. Recuperado em 09 de julho, 2019, de http://static.cpc.aatb.com.br/Documentos/312_CPC_26_R1_rev%2013.pdf
Costello, A. M., & Moerman, R. W. (2011). The Impact of Financial Reporting Quality on Debt Contracting: Evidence from Internal Control Weakness Reports. Journal of Accounting Research, 49(1), 97-136. https://doi.org/10.1111/j.1475-679X.2010.00388.x
Cunha, F. A. F. S., & Samanez, C. P. (2013). Performance Analysis of Sustainable Investments in the Brazilian Stock Market: A Study About the Corporate Sustainability Index (ISE). Journal of Business Ethics, 117(1), 19-36. http://doi.org/10.1007/s10551-012-1484-2
Demerjian, P. R. (2017). Uncertainty and debt covenants. Review of Accounting Studies, 22(3), 1156-1197. https://doi.org/10.1007/s1114
Demiroglu, C., & James, C. M. (2010). The Information Contento f Bank Loan Covenants. The Review of Financial Studies, 23(10), 3700-3737. https://www.jstor.org/stable/40865573
Franz, D.; Hassabelanby, R., & Lobo, G. J. (2014). Impact of proximity to debt covenant violation on earnings management. Review Accounting Studies, 19, 473–505. https://doi.org/10.1007/s11142-013-9252-9
Gu, Z.; Lee, C. J., & Rosett, J. G. (2005). What determines the variability of accounting accruals. Review of Quantitative Finance And Accounting, 24, 313-334. https://doi.org/10.1007/s11156-005-6869-1
Guenster, N.; Bauer, R.; Derwall, J., & Koedijk, K. (2011). The Economic Value of Corporate Eco-Efficiency. European Financial Management, 17(4), 679-704. https://doi.org/10.1111/j.1468-036X.2009.00532.x
Iatridis, G., & Kadorinis, G. (2009). Earnings management and firm financial motives: A financial investigation of UK listed firms. International Review of Financial Analysis, 18, 164-173. https://doi.org/10.1016/j.irfa.2009.06.001
Inamura, Y. (2009). The determinants of accounting based covenants in public debt contracts. Journal of International Business Research, 8, 1-15.
Lo, S. F., & Sheu, H. J. (2007). Is Corporate Sustainability a Value‐Increasing Strategy for Business? Corporate Governance An International Review, 15(2), 345-348. https://doi.org/10.1111/j.1467-8683.2007.00565.x
López, V.; Garcia, A., & Rodriguez, L. (2007). Sustainable Development and Corporate Performance: A Study Based on the Dow Jones Sustainability Index. Journal of Business Ethics, 75, 285-300. https://doi.org/10.1007/s10551-006-9253-8
Lourenço, I C., & Branco, M. C. (2013). Determinants of corporate sustainability performance in emerging markets: the Brazilian case. Journal of Cleaner Production, 57(15), 134-141. https://doi.org/10.1016/j.jclepro.2013.06.013
Machado, M. R.; Machado, M. A. V, & Corrar, L. J. (2009). Desempenho do Índice de Sustentabilidade Empresarial (ISE) da Bolsa de Valores de São Paulo. Revista Universo Contábil, 5(2), 24-38. https://doi:10.4270/ruc.2009211
Masse, I.; Hanrahan, R.; Kushner, J., & Martinello, F. (2000). The effect of additions to or deletions from the ISE 300 Index on Canadian share prices. Canadian Journal of Economics, 33(2), 341-360. https://doi.org/10.1111/0008-4085.00019
Nini, G.; Smith, D. C., & Sufi, A. (2009). Creditor control rights and firm investment policy. Journal of Financial Economics, 92(3), 400-420. https://doi.org/10.1016/j.jfineco.2008.04.008
Nikolaev, V.V. (2010). Debt Covenants and Accounting Conservatism. Journal of Accounting Research, 48(1), 137-175. https://doi.org/10.1111/j.1475-679X.2009.00359.x
Nunes, J. G.; Teixeira, A. J. C.; Nossa, V., & Galdi, F. C. (2010). Análise das Variáveis que Influenciam a Adesão das Empresas ao Índice BM&FBOVEPA de Sustentabilidade Empresarial. Revista de Administração e Contabilidade de Unisinos, 7(4), 328-340. https://doi:10.4013/base.2010.74.06
Orlitzky, M.; Schmidt, F. L., & Rynes, S. L. (2003). Corporate Social and Financial Performance: A Meta-Analysis. Organization Studies, 24(3), 403-441. https://doi.org/10.1177/0170840603024003910
Orsato, R. J.; Garcia, A.; Mendes, Wesley. S.; Simonetti, R., & Monzoni, M. (2015). Sustainability indexes: why join in? A study of the 'Corporate Sustainability Index (ISE)' in Brazil, Journal of Cleaner Production, 96, 161-171. http://dx.doi.org/10.1016/j.jclepro.2014.10.071
Peixoto, F. M.; Pains, M. B.; Araújo, A. A., & Guimarães, T. M. (2016). Custo de Capital, Endividamento e Sustentabilidade: Um Estudo no Mercado de Capitais Brasileiro no período de 2009 a 2013. Revista de Contabilidade, Administração e Economia, 15(1), 39-66. http://dx.doi.org/10.18593/race.v15i1.6281
Press, E., & Weintrop, J. (1991). Financial Statement Disclosure of Accounting-Based Debt Covenants. Accounting Horizons. 5(1), 64-74
Prilmeier, R. (2017). Why do loans contain covenants? Evidence from lending relationships. Journal of Financial Economics, 123(3), 558-579. https://doi.org/10.1016/j.jfineco.2016.12.007
Romano, P. R.; Ernel, M. D. A, & Mol, A. L. R. (2016). Características das Empresas Brasileiras Pertencentes ao Índice de Sustentabilidade Empresarial (ISE) da BM&FBOVESPA no Périodo de 2010 a 2013 e seu Retorno Anormal. Revista Universo Contábil, 12(2), 06-20. https://doi:10.4270/ruc.2016211
Silva, A. H. C. (2008). Escolha de práticas contábeis no Brasil: uma análise sob a ótica da hipótese dos covenants contratuais. Tese (Doutorado em Ciências Contábeis) – Programa de Pós Graduação em Ciências Contábeis, Universidade de São Paulo, São Paulo. Recuperado e 20 abril, 2019, de http://www.teses.usp.br/teses/disponiveis/12/12136/tde-16012009-120147/pt-br.php
Silva, E. H. D. R.; Lima, E. P.; Costa, S. E. G., & Sant’Anna, Â, M, O. (2015). Análise comparativa de rentabilidade: um estudo sobre o Índice de Sustentabilidade Empresarial. Gestão & Produção, 22(4), 743-754. http://dx.doi.org/10.1590/0104-530X1889-14
Texeira, E. A.; Nossa, V., & Funchal, Bruno (2010). O Índice de Sustentabilidade Empresarial (ISE) e os impactos no endividamento e na percepção de risco. Revista de Contabilidade & Finanças, 22(55), 29-44.
Watts, R. L., & Zimmerman, J. L. (1990). Positive Accounting Theory: A ten year perspective. The accounting review, 65(1), 131-156.
Watts, R. L., & Zimmerman, J. L (1978). Towards a positive theory of the determination of accounting standards. The Accounting Review, 53(1), 112-134.
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Published
2021-02-11
How to Cite
Oliveira, W. da C. de. (2021). THE Companies Participating in the Corporate Sustainability Index and the Restrictive Financial Debt Clauses . Revista Evidenciação Contábil & Finanças, 9(1), 63–76. https://doi.org/10.22478/ufpb.2318-1001.2021v9n1.52732
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