ABSTRACT
The objective of this study was to examine the effect of political uncertainty observed in Brazil from 2014 to 2016 on the economic performance and valuation of Brazilian companies. This research contribute to the evolution of knowledge on political uncertainty, as well as to deepen the analysis of the results presented by studies that sought to measure and demonstrate the effects produced by an environment of high political uncertainty and how this is capable of affect both the economy and corporate finance. To indicate the period of political uncertainty, the survey used the Standard and Poors’ Global Ratings for Latin America reports between 03/2014 and 02/2016. To determine the economic performance, the variables dependent on the study are ROE, ROA, ROI, EVA and Ebitda. For valuation, we used Tobin’s Q, MVA and Price to Book Ratio. The sample consisted of 4,658 observations of Brazilian public companies for the period between 2011 and 2016. Descriptive statistics, non-parametric tests, factorial analysis and multiple regression with panel data were used. Aligned with the previous studies and in line with what was expected, there was evidence that the high level of political uncertainty reached the economic activity in the form of a drop in performance and destruction of the market value of Brazilian companies. These findings are robust to the application of EPU (Economic Policy Uncertainty) index proposed by Baker, Bloom and Davidson (2013).
Keywords:
Economic performance; Political uncertainty; Valuation