Political and financial background in board interlocking and earnings management in Brazil

Magro, Cristian Baú Dal; Klann, Roberto Carlos

doi:10.1108/RAUSP-10-2020-0245

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Brasil

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Sumário

Research Paper • RAUSP 56 (4) • Oct-Dec 2021 • https://doi.org/10.1108/RAUSP-10-2020-0245 copy

Political and financial background in board interlocking and earnings management in Brazil

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

Purpose

Although board interlocking underlying forces are largely hidden, the purpose of this paper is to provide managers, auditors, analysts, regulators and other stakeholders with sociological board interlocking information considering the different backgrounds of their members.

Design/methodology/approach

The research sample gathered 1,606 observations from 2010 to 2017. For data analysis, the direct and indirect board interlocking linkages, considering the different backgrounds of board members, established the centrality indicators. Subsequently, the authors used these indicators according to each measured background in the regression models.

Findings

The results indicate that the political background of board interlocking members is positively related to real earnings management practices, while the financial background has a mitigating effect on such practices.

Research limitations/implications

The findings suggest that individual skills and interests conveyed across the corporate social network have shaped corporate governance, with distinct impacts on the quality of accounting information.

Practical implications

The authors conclude that both backgrounds could have implications on agency conflicts, increasing (policy) or reducing (financial) information asymmetry between the company and its various stakeholders, which indicates that the authors must consider sociological and not just economic aspects within corporate governance.

Social implications

The sociological background of individuals is necessary for the congruence of monitoring mechanisms, and consequently, the quality of accounting information.

Originality/value

This study examines the influence of the political and financial background of board interlocking members on real earnings management practices in Brazilian publicly traded companies in the International Financial Reporting Standards post-adoption period.

Keywords
Corporate governance; Accounting information quality; Board interlocking; Political background; Financial background

Companies	2010	2011	2012	2013	2014	2015	2016	2017
(+) Listed on BM&FBovespa	434	434	434	434	434	434	434	434
(−) no documentary and financial data	(72)	(81)	(77)	(67)	(70)	(69)	(68)	(62)
(=) Sample used in network analysis	362	353	357	367	364	365	366	372
(−) financial industry and other ones:	(29)	(61)	(61)	(61)	(59)	(59)	(59)	(59)
(−) Companies with no data for:
(−) sales revenue	(93)	(37)	(36)	(36)	(39)	(38)	(38)	(39)
(−) operating cash flow	(08)	(05)	(04)	(04)	(03)	(04)	(04)	(04)
(−) total asset	(04)	–	–	(01)	–	–	–	–
(−) discretionary expenses	(06)	(04)	(04)	(05)	(05)	(05)	(05)	(06)
(−) production costs	(06)	(11)	(14)	(18)	(17)	(17)	(16)	(16)
(−) administrative council	(02)	(02)	(03)	(03)	(01)	(03)	(02)	(02)
(−) growth variable	(03)	(11)	(07)	(09)	(04)	(03)	(03)	(04)
(−) equity with negative values	(15)	(14)	(13)	(12)	(11)	(11)	(11)	(11)
(−) Outliers:
(−) with indebtedness in 5 D.P	(01)	–	–	–	–	–	–	–
(−) with production costs in 5 D.P	(02)	(04)	(04)	(05)	(04)	(04)	(04)	(03)
(−) with total assets in 5 D.P	(01)	(01)	(01)	(01)	(01)	(01)	(01)	(01)
(−) with operating cash flow in 5 D.P	(03)	(03)	(03)	(03)	(03)	(03)	(03)	(03)
(−) with divergent residues in 5 D.P	(08)	(08)	(09)	(10)	(11)	(10)	(10)	(11)
(=) Sample used in empirical models	181	192	198	199	206	207	210	213

Dimension	Variable	Metric	Reference
REM	CFO	$(\frac{{C F O}_{it}}{A_{i t - 1}} = k_{1} \frac{1}{A_{i t - 1}} + k_{2} \frac{S_{it}}{A_{i t - 1}} + K_{3} \frac{{Δ S}_{it}}{A_{i t - 1}} + ε_{it})$ * (−1)	Graham et al. (2005); Roychowdhury (2006)Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370. doi: 10.1016/j.jacceco.2006.01.002. https://doi.org/10.1016/j.jacceco.2006.0... , Cohen and Zarowin (2010)Cohen, D. A., & Zarowin, P. (2010). Accrual-based and real earnings management activities around seasoned equity offerings. Journal of Accounting and Economics, 50(1), 2–19. doi: 10.1016/j.jacceco.2010.01.002. https://doi.org/10.1016/j.jacceco.2010.0... ; Zang (2012)Zang, A. Y. (2012). Evidence on the trade-off between real activities manipulation and accrual-based earnings management. The Accounting Review, 87(2), 675–703. https://doi.org/10.2308/accr-10196. https://doi.org/10.2308/accr-10196...
	PROD	$\frac{{P R O D}_{it}}{A_{i t - 1}} = k_{1} \frac{1}{A_{i t - 1}} + k_{2} \frac{S_{it}}{A_{i t - 1}} + K_{3} \frac{{Δ S}_{it}}{A_{i t - 1}} + K_{4} \frac{{Δ S}_{i t - 1}}{A_{i t - 1}} + ε_{it}$
	DISEXP	$(\frac{{D I S E X P}_{it}}{A_{i t - 1}} = k_{1} \frac{1}{A_{i t - 1}} + k_{2} \frac{S_{it}}{A_{i t - 1}} + K_{3} \frac{{Δ S}_{it}}{A_{i t - 1}} + ε_{it})$ * (−1)
	REM	$(F C O i t * - 1) + (D I S E X P i t * - 1) + (P R O D i t))$
PB	DTPC	Board members with political background and intra-firm sharing (direct), measured by the number of ties. Indicator generated by the UCINET software $C_{D} (v_{i}) = \frac{d (n_{i})}{n - 1}$	*Boubakri et al.* (2012)Boubakri, N., Guedhami, O., Mishra, D., & Saffar, W. (2012). Political connections and the cost of equity Capital. Journal of Corporate Finance, 18(3), 541–559. doi: 10.1016/j.jcorpfin.2012.02.005. https://doi.org/10.1016/j.jcorpfin.2012.... , Chen et al. (2010)Chen, C. J., Ding, Y., & Kim, C. F. (2010). High-level politically connected firms, corruption, and accurate forecasting around the world. Journal of International Business Studies, 41(9), 1505–1524. doi: 10.1057/jibs.2010.27. https://doi.org/10.1057/jibs.2010.27... ; Chaney et al. (2011)Chaney, P. K., Faccio, M., & Parsley, D. (2011). The quality of accounting information in politically connected firms. Journal of Accounting and Economics, 51(1-2), 58–76. doi: 10.1016/j.jacceco.2010.07.003. https://doi.org/10.1016/j.jacceco.2010.0... , Camilo et al. (2012)Camilo, S. P. O., Marcon, R., & Bandeira-de-Mello, R. (2012). Political connections of firms and their effects on performance: A convergence between the perspectives of governance and resource dependence – a theoretical essay. Revista Alcance, 19(2), 241–258.; Chiu et al. (2013)Chiu, P. C., Teoh, S. H., & Tian, F. (2013). Board interlocks and earnings management contagion. The Accounting Review, 88(3), 915–944. doi: 10.2308/accr-50369. https://doi.org/10.2308/accr-50369... , Batta et al. (2014)Batta, G., Sucre Heredia, R., & Weidenmier, M. (2014). Political connections and accounting quality under high expropriation risk. European Accounting Review, 23(4), 485–517. doi: 10.1080/09638180.2014.906316. https://doi.org/10.1080/09638180.2014.90... ; Guedhami et al. (2014)Guedhami, O., Pittman, J. A., & Saffar, W. (2014). Auditor choice in politically connected firms. Journal of Accounting Research, 52(1), 107–162. doi: 10.1111/1475-679X.12032. https://doi.org/10.1111/1475-679X.12032... , Braam et al. (2015)**Braam, G., Nandy, M., Weitzel, U., & Lodh, S. (2015). Accrual-based and real earnings management and political connections. The International Journal of Accounting, 50(2), 111–141. doi: 10.1016/j.intacc.2013.10.009. https://doi.org/10.1016/j.intacc.2013.10...
PB	ITPC	Board members with political backgrounds and sharing (indirect) interfirm in the form of the number of established ties. Indicator generated by the UCINET software $C_{b} (V_{i}) = \sum_{j < 1} \frac{g j k (V_{i})}{gjk}, i \neq, j \neq, k$
FB	DTFC	Board members with a financial background and intra-firm sharing (direct), in the form of the number of established ties. Indicator generated by the UCINET software	Byrd and Mizruchi (2005)Byrd, D. T., & Mizruchi, M. S. (2005). Bankers on the board and the debt ratio of firms. Journal of Corporate Finance, 11(1-2), 129–173. doi: 10.1016/j.jcorpfin.2003.09.002. https://doi.org/10.1016/j.jcorpfin.2003.... ; *Güner et al.* (2008)Güner, A. B., Malmendier, U., & Tate, G. (2008). Financial background of directors. Journal of Financial Economics, 88(2), 323–354. doi: 10.1016/j.jfineco.2007.05.009. https://doi.org/10.1016/j.jfineco.2007.0... ; Dhaliwal, Naiker and Navissi (2010)**Dhaliwal, D. A. N., Naiker, V. I. C., & Navissi, F. (2010). The association between accruals quality and the characteristics of accounting experts and mix of background on audit committees. Contemporary Accounting Research, 27(3), 787–827. doi: 10.1111/j.1911-3846.2010.01027.x. https://doi.org/10.1111/j.1911-3846.2010...
FB	ITFC	Board members with financial background and sharing (indirect) interfirm in the form of the number of established ties. Indicator generated by the UCINET software

Variable	Metric	Reference
SP	Company share price i at the end of year t−1 divided by the total assets of firm i at the end of t−1	Cohen, Dey and Lys (2008)Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual‐based earnings management in the pre‐and post‐Sarbanes‐Oxley periods. The Accounting Review, 83(3), 757–787. https://doi.org/10.2308/accr.2008.83.3.757. https://doi.org/10.2308/accr.2008.83.3.7... ; Dechow, Ge and Schrand (2010)Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344–401. https://doi.org/10.1016/j.jacceco.2010.09.001. https://doi.org/10.1016/j.jacceco.2010.0... ; *Chen et al.* (2009Chiu, P. C., Teoh, S. H., & Tian, F. (2013). Board interlocks and earnings management contagion. The Accounting Review, 88(3), 915–944. doi: 10.2308/accr-50369. https://doi.org/10.2308/accr-50369... ; 2010)**Chen, R., Dyball, M. C., & Wright, S. (2009). The link between board composition and corporate diversification in Australian corporations. Corporate Governance: An International Review, 17(2), 208–223. doi: 10.1111/j.1467-8683.2009.00734.x. https://doi.org/10.1111/j.1467-8683.2009...
MTB	(Market value of year t−1)/(Book value in year t−1)
ROA	(Net Operating Profit in year t−1)/(Total assets in year t−1)	*Chen et al.* (2009Chiu, P. C., Teoh, S. H., & Tian, F. (2013). Board interlocks and earnings management contagion. The Accounting Review, 88(3), 915–944. doi: 10.2308/accr-50369. https://doi.org/10.2308/accr-50369... ; 2010)**Chen, R., Dyball, M. C., & Wright, S. (2009). The link between board composition and corporate diversification in Australian corporations. Corporate Governance: An International Review, 17(2), 208–223. doi: 10.1111/j.1467-8683.2009.00734.x. https://doi.org/10.1111/j.1467-8683.2009... ; Doukakis (2014)
GROWTH	$\frac{S a l e s o f t h e y e a r (t - 1) - S a l e s o f t h e y e a r (t - 2)}{S a l e s o f t h e y e a r (t - 2)}$	Roychowdhury (2006)Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370. doi: 10.1016/j.jacceco.2006.01.002. https://doi.org/10.1016/j.jacceco.2006.0... ; Cohen, Dey and Lys (2008)Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual‐based earnings management in the pre‐and post‐Sarbanes‐Oxley periods. The Accounting Review, 83(3), 757–787. https://doi.org/10.2308/accr.2008.83.3.757. https://doi.org/10.2308/accr.2008.83.3.7... ; *Chen et al.* (2009Chiu, P. C., Teoh, S. H., & Tian, F. (2013). Board interlocks and earnings management contagion. The Accounting Review, 88(3), 915–944. doi: 10.2308/accr-50369. https://doi.org/10.2308/accr-50369... ; 2010)**Chen, R., Dyball, M. C., & Wright, S. (2009). The link between board composition and corporate diversification in Australian corporations. Corporate Governance: An International Review, 17(2), 208–223. doi: 10.1111/j.1467-8683.2009.00734.x. https://doi.org/10.1111/j.1467-8683.2009...
SIZEBD	Number of audit committee members in year t	*Graham et al.* (2005)Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1-3), 3–73. https://doi.org/10.1016/j.jacceco.2005.01.002. https://doi.org/10.1016/j.jacceco.2005.0... ; Dechow, Ge and Schrand (2010)Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344–401. https://doi.org/10.1016/j.jacceco.2010.09.001. https://doi.org/10.1016/j.jacceco.2010.0... ; Ge and Kim (2014)**Ge, W., & Kim, J. B. (2014). Boards, takeover protection, and real earnings management. Review of Quantitative Finance and Accounting, 43(4), 651–682. doi: 10.1007/s11156-013-0388-2. https://doi.org/10.1007/s11156-013-0388-...
INDBDDM	The number of independent directors (those not linked to the company management) divided by the number of directors of a company i in year t	Ge and Kim (2014)Ge, W., & Kim, J. B. (2014). Boards, takeover protection, and real earnings management. Review of Quantitative Finance and Accounting, 43(4), 651–682. doi: 10.1007/s11156-013-0388-2. https://doi.org/10.1007/s11156-013-0388-... ; *Achleitner et al.* (2014)**Achleitner, A. K., Günther, N., Kaserer, C., & Siciliano, G. (2014). Real earnings management and accrual-based earnings management in family firms. European Accounting Review, 23(3), 431–461. https://doi.org/10.1080/09638180.2014.895620. https://doi.org/10.1080/09638180.2014.89...
EXPBDDM	The number of board members with an academic background in accounting, auditing and finance divided by the number of a company i directors in year t
DEV	$\frac{G D P y e a r (t) - G D P y e a r (t - 1)}{G D P y e a r (t - 1)}$	*Chen et al.* (2009Chiu, P. C., Teoh, S. H., & Tian, F. (2013). Board interlocks and earnings management contagion. The Accounting Review, 88(3), 915–944. doi: 10.2308/accr-50369. https://doi.org/10.2308/accr-50369... ; 2010)**Chen, R., Dyball, M. C., & Wright, S. (2009). The link between board composition and corporate diversification in Australian corporations. Corporate Governance: An International Review, 17(2), 208–223. doi: 10.1111/j.1467-8683.2009.00734.x. https://doi.org/10.1111/j.1467-8683.2009...
SIZE	Natural logarithm of total asset of a company i at the beginning of year t	*Graham et al.* (2005)Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1-3), 3–73. https://doi.org/10.1016/j.jacceco.2005.01.002. https://doi.org/10.1016/j.jacceco.2005.0... ; Cohen, Dey and Lys (2008)**Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual‐based earnings management in the pre‐and post‐Sarbanes‐Oxley periods. The Accounting Review, 83(3), 757–787. https://doi.org/10.2308/accr.2008.83.3.757. https://doi.org/10.2308/accr.2008.83.3.7...
IND (Industry)	Industrial goods, construction and transportation, cyclic consumption, non-cyclic consumption, basic materials, oil, gas and biofuel, information technology, telecommunications and public utility	*Graham et al.* (2005)Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1-3), 3–73. https://doi.org/10.1016/j.jacceco.2005.01.002. https://doi.org/10.1016/j.jacceco.2005.0... ; Roychowdhury (2006)Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370. doi: 10.1016/j.jacceco.2006.01.002. https://doi.org/10.1016/j.jacceco.2006.0... , Cohen and Zarowin (2010)**Cohen, D. A., & Zarowin, P. (2010). Accrual-based and real earnings management activities around seasoned equity offerings. Journal of Accounting and Economics, 50(1), 2–19. doi: 10.1016/j.jacceco.2010.01.002. https://doi.org/10.1016/j.jacceco.2010.0...
YEAR	2010, 2011, 2012, 2013, 2014 and 2015

Different backgrounds		NAFCO		NAPROD		NADPDISC		GRA
Different backgrounds		(1)	(0)	(1)	(0)	(1)	(0)	(1)	(0)
DTPC	Average	−0.0026	0.0020	0.0178	−0.0141	0.0242	−0.0192	0.0394	−0.0313
	D.P	0.0711	0.0717	0.0753	0.0942	0.0549	0.0821	0.1570	0.1928
	n	525	661	525	661	525	661	525	661
	Test t	0.895		0.000^* ***** Significance at 1% level		0.000^* ***** Significance at 1% level		0.000^* ***** Significance at 1% level
DTFC	Average	−0.0085	0.0056	−0.0126	0.0083	−0.0007	0.0005	−0.0217	0.0143
	D.P	0.0730	0.0702	0.0897	0.0821	0.0707	0.0707	0.1813	0.1721
	n	471	715	471	715	471	715	471	715
	Test t	0.573		0.144		1.000		0.391
ITPC	Average	0.0037	−0.0005	0.0318	−0.0043	0.0362	−0.0049	0.0716	−0.0097
	D.P	0.0582	0.0733	0.0804	0.0868	0.0602	0.0715	0.1586	0.1799
	n	141	1,045	141	1,045	141	1,045	141	1,045
	Test t	0.046^ Significance at 5% level;		0.407		0.107		0.180
ITFC	Average	−0.0168	0.0025	−0.0457	0.0067	−0.0110	0.0016	−0.0735	0.0108
	D.P	0.0762	0.0704	0.0830	0.0851	0.0603	0.0721	0.1666	0.1768
	n	152	1,034	152	1,034	152	1,034	152	1,034
	Test t	0.427		0.790		0.084^* * Significance at 10% level;		0.513

	LDCP		LDCF		LICP		LICF
Incentives	(1)	(0)	(1)	(0)	(1)	(0)	(1)	(0)
SP	18.9372^ Significance at 5% level;	23.1004	24.7666	18.946	22.1082	24.363	23.7242	24.723
MTB	1.3870	1.5242	1.7250^* Notes: * Significance at 10% level;	1.2912	1.1232	1.6005	1.9086^* Notes: * Significance at 10% level;	1.4657
ROA	0.0418	0.0339	0.0473	0.0309	0.0426^* Notes: * Significance at 10% level;	0.0476	0.0598^ Significance at 5% level;	0.0431
GROWTH	0.1451^* ***** Significance at 1% level	0.2099	0.1658	0.1914	0.1799	0.1834	0.1689	0.1727
SIZEBD	0.3124^* ***** Significance at 1% level	0.3767	0.5796^* Notes: * Significance at 10% level;	0.1958	0.3333	0.3211	0.5329^* Notes: * Significance at 10% level;	0.2897
INDBDDM	0.1743	0.1541	0.2126^* Notes: * Significance at 10% level;	0.1304	0.1972	0.1891	0.1992^* Notes: * Significance at 10% level;	0.1863
EXPBDDM	0.5056	0.4810	0.5859^* ***** Significance at 1% level	0.4300	0.5647	0.4723	0.6258	0.4658

Explanatory variables	Equation (18)
	FCO		PROD		DISEXP		REM
	Coeffic.	Stat. T	Coeffic.	Stat. T	Coeffic.	Stat. T	Coeffic.	Stat. T
Constant	0.08037^ ; 1%	1.97	0.13293^ ; 1%	2.19	0.03526	1.01	0.25604^* *	2.64
DTPC	0.002612^* * , 5%	1.90	0.00333^ ; 1%	2.27	0.00468^* *	3.54	0.01134^* *	3.54
ITPC	5.65e−06	0.29	0.00003	0.92	−8.52e−06	−0.35	0.00002	0.53
SP	0.00018^* *	2.92			−0.00038^* *	−5.55	−0.00025	−1.30
MTB	−0.01532^* *	−4.97	−0.02494^* *	−8.16	−0.01241^* *	−5.33	−0.05270^* *	−8.54
ROA	−0.36615^* *	−6.30	−0.31559^* *	−5.34	0.08001^* * , 5%	1.77	−0.61381^* *	−5.36
GROWTH	0.01234^* *	6.03	0.01295^* *	6.62			0.03056^* *	6.82
SIZEBD	−0.00413^* * , 5%	−1.86	−0.00518^ ; 1%	−2.24	−0.0531^* *	−2.58	−0.01409^* *	−3.07
INDBDDM			0.06182^* *	3.18	0.06094^* *	4.00	0.12194^* *	3.19
EXPBDDM	0.02797^ ; 1%	2.55
DEV	0.18321	1.64	0.03002	0.23	−0.12005	−1.21	0.09854	0.38
SIZE	−0.00208	−1.10	−0.00539^ ; 1%	−2.31	−0.00205	−1.08	−0.00901^ ; 1%	−2.01
Year FE	Yes		Yes		Yes		Yes
Industry FE	Yes		Yes		Yes		Yes
Stat. Sig. F	0.000		0.000		0.000		0.000
R²	0.1976		0.2889		0.2822		0.3036
VIF	From 1.00 to 1.9		From 1.00 to 1.9		From 1.00 to 1.9		From 1.00 to 1.9
DW	2.020		1.853		1.939		1.869
Breusch-Pagan	0.9342		0.4656		0.0000		0.6936
Test. White	0.9989		3.8e−11		0.2791		1.7e−06
n	1,606		1,606		1,606		1,606

Explanatory variables	Equation (19)
	FCO		PROD		DISEXP		REM
	Coeffic.	Stat. T	Coeffic.	Stat. T	Coeffic.	Stat. T	Coefic.	Stat. T
Constant	0.06125	1.50	0.09659	1.62	0.00548	0.16	0.16461	1.71
DTFC	0.00136	1.17	−0.00032	−0.25	0.00137	1.37	0.00351	1.29
ITFC	−9.95e−06	−1.16	−0.00004^* *****	−4.45	−0.00003^* *****	2.98	−0.00008^* *****	−4.06
SP	0.00017^* *****	2.83			−0.00039^* *****	−5.76	−0.00029	−1.52
MTB	−0.01546^* *****	−4.97	−0.02442^* *****	−7.95	−0.01229^* *****	−5.19	−0.05231^* *****	−8.32
ROA	−0.36389^* *****	−6.27	−0.30197^* *****	−5.25	0.08834^* * , 5%	1.92	−0.59279^* *****	−5.21
GROWTH	0.01227^* *****	6.01	0.01240^* *****	6.39			0.02977^* *****	6.66
SIZEBD	−0.00456^ ; 1%	−2.00	−0.00534^ ; 1%	−2.34	−0.00572^* *****	−2.73	−0.01528^* *****	−3.27
INDBDDM			0.06470^* *****	3.34	0.06087^* *****	3.91	0.12268^* *****	3.22
EXPBDDM	0.02906^* *****	2.59
DEV	0.21095^* * , 5%	1.95	0.07442	0.59	−0.09342	−0.96	0.21130	0.84
SIZE	−0.00118	−0.63	−0.00292	−1.25	−0.00029	−0.15	−0.00373	−0.84
Year FE	Yes		Yes		Yes		Yes
Industry FE	Yes		Yes		Yes		Yes
Stat. Sig. F	0.000		0.000		0.000		0.000
R²	0.1962		0.2908		0.2780		0.2993
VIF	From 1.0 to 1.9		From 1.0 to 1.9		From 1.0 to 1.9		From 1.0 to 1.9
DW	2.017		1.859		1.937		1.874
Breusch-Pagan	0.8942		0.2354		0.0000		0.2471
Test. White	0.9507		6.1e −10		0.6525		1.8e−06
n	1,606		1,606		1,606		1,606

Explanatory variables	Sample of state-owned companies		Sample of non-state-owned companies		Companies with low indebtedness		Companies with height indebtedness
	REM		REM		REM		REM
	Coeffic.	Stat. T	Coeffic.	Stat. T	Coeffic.	Stat. T	Coefic.	Stat. T
Constant	0.0371	0.667	−0.035525	−0.96	0.0918	0.94	0.0658	0.60
DTPC	0.0005	0.25	0.0061^* *	3.17
ITPC	0.00011^* *	2.00	−0.0003	−1.37
DTFC					0.0014	0.34	0.0097^* *	2.62
ITFC					−0.0015^* *	−2.10	−0.0028^* *	−3.32
SP	−0.0006^* *	−2.48	−0.00012^* *	−3.22	0.0003^* *	2.48	−0.0009^* *	−4.26
MTB	0.0079	1.46	−0.0040	−0.97	−0.0686^* *	−6.93	−0.0526^* *	−5.92
ROA	0.2468^* *	2.03	0.00391	0.06	−0.7846^* *	−3.37	−0.2983^* *	−2.31
GROWTH	0.00608^* *	2.04	−0.00780	−0.96	−0.0016	−0.18	0.0219^* *	8.14
SIZEBD	0.00563	1.25	−0.00375	−1.35	−0.0226^* *	−2.77	−0.0098^* *	−1.95
INDBDDM	0.0442	1.30	−0.00505	−0.38	0.0715	1.20	0.1449^* *	2.83
DEV	−0.4689	−1.42	0.06041	0.45	0.4924	1.29	−0.0078	−0.02
SIZE	−0.0032	−0.67	0.00217	0.95	−0.0031	−0.50	0.0028	0.44
Year FE	Yes		Yes		Yes		Yes
Industry FE	Yes		Yes		Yes		Yes
Sig. Stat. F	0.000		0.000		0.000		0.000
R²	0.1559		0.0454		0.2887		0.1660
n	176		1.010		593		593

Universidade de São Paulo Avenida Professor Luciano Gualberto, 908, sala F184, CEP: 05508-900, São Paulo , SP - Brasil, Telefone: (11) 3818-4002 - São Paulo - SP - Brazil
E-mail: rausp@usp.br

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[1] *Corresponding author Cristian Baú Dal Magro can be contacted at: cristianbaumagro@gmail.com