Research in International Business and Finance 45 (2018) 257–270

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Research in International Business and Finance

journal homepage: www.elsevier.com/locate/ribaf

Corporate governance and debt securities issued in Brazil and

T
India: A multi-case study
⁎
Thiago Avila Marquesa, Karem Cristina de Sousa Ribeirob, Flavio Barbozab,
a
EY, São Paulo, SP 04543-011, Brazil
b
Federal University of Uberlândia, Santa Mônica Campus, Uberlândia, MG 38408-100, Brazil

AR TI CLE I NF O AB S T R A CT

JEL classification: The corporate debt market tends to provide a funding alternative, but requires improvements in
G32 regulation and self-regulation. Therefore, corporate governance arises as a central element for
G34 reducing agency conflicts, and private debt market development. We analyze the corporate
L21 governance structure of debt issuers from Brazil and India through an index of Economic
L25
Commission for Latin America and the Caribbean (ECLAC). The results showed that the non-
Keywords: defaulted companies had higher scores and the corporate governance quality of the issuer tends
Corporate governance to contribute to the fulfillment of its obligations.
ECLAC index
Brazil
India

1. Introduction

The pecking order theory, initially developed by Myers (1984) in order to rank the sources of funds available to companies, shows
that, after exhausting the initial option represented by the financing of retained resources, companies search for funding via debt
(e.g., bank loans or bond issuance) – and, as a last option, offer shares publicly. Thus, among the financing alternatives fulfilled by
third parties, corporate debt issuance stands as one of the most economical ways to obtain financing. Pour (2017) obtained results
aligned to capital sources hierarchy envisaged by the pecking order theory, although the study pointed out a delay access, at least, for
companies to the corporate debt market is caused due to agency conflicts.
Leal and Silva (2006), Lopes and Alencar (2010), Maurya and Kumar (2012) and Venkatraman and Selvam (2014) highlight that
the debt market is one of the most critical components of the financial system in any economy simply because it operates as a leverage
tool for both the public and private sectors. With respect to corporate financing needs, the corporate bond market is established as an
alternative to bank financing for long-term funds, and, according to Mukherjee (2012), it represents a stable source of financing when
the stock market is highly volatile and eventually reduces the overall cost of companies’ capital.
Mukherjee (2012) reiterates the importance of the private debt market as leveraging alternative economies dominated by cor-
porate finance exercised by the banking system, as this mode imposes limits on the growth of firms precisely because of their own
limits of credit expansion. This reality is present more often in countries currently considered as emerging, whose corporate gov-
ernance systems were established in the light of the banking system's performance and, therefore, converged to the German model
instead of aligning to the Anglo-Saxon model.
The proposal acronym that brings together some of the major emerging countries, namely BRIC – Brazil, Russia, India and China),
which added ‘S’ (South Africa) in 2012 – qualifies a set of countries that have great potential to achieve prominent positions in the

⁎
Corresponding author.
E-mail addresses: thiago.avila@br.ey.com (T.A. Marques), kribeiro@ufu.br (K.C. de Sousa Ribeiro), flmbarboza@ufu.br (F. Barboza).

http://dx.doi.org/10.1016/j.ribaf.2017.07.156
Received 5 February 2016; Received in revised form 17 October 2016; Accepted 6 July 2017
Available online 13 July 2017
0275-5319/ © 2017 Elsevier B.V. All rights reserved.
T.A. Marques et al. Research in International Business and Finance 45 (2018) 257–270

world economy but that have recently shown signs of weakness in their economies, such as Brazil (2013), China and Russia (2014).
In particular, the corporate bond markets of Brazil and India held in 2012 a total of issuances equivalent to 21.23% and 5.74% of
gross domestic product (GDP), respectively, indicating the potential for increasing this dimension of the capital of these country
markets. Such potential is more evident if we observe the government bond market in the same year, which reached a volume
equivalent to 35.15% and 32.84% of the GDP of Brazil and India, respectively (Maurya and Kumar, 2012; Mukherjee, 2012). Hence,
the strengthening of the capital markets in Brazil and India tends to represent an alternative to the traditional model of business
financing in force in these countries, led by public and private banks.
To support this claim, for the Brazilian Association of Financial and Capital Markets (ANBIMA) during the period between 2009
and 2014, the amount of issuances grew on average 28% per year in Brazil. For India, data from the National Stock Exchange (NSE)
indicate that the amount of primary issuances grew by an average 26.5% per year over the same period (Paula and Faria Junior,
2012; Maurya and Kumar, 2012).
It turns out that for the capital markets to develop satisfactorily and to carry out their potentially benign effects on the country,
companies should provide them with instruments to protect the interests of their investors. In other words, firms want to establish a
set of devices that are capable of protecting shareholders, creditors and other participants of the capital market (Liao et al., 2014).
Jensen and Meckling (1976) suggest that the potential conflict between shareholders and debt security holders is primarily
manifested in terms of the expropriation of wealth. Shareholders and managers expropriate wealth from creditors to invest in higher-
risk projects than those already ongoing, thus producing costs derived from the divergence of interests between them, which are debt
agency costs, and these extend the financial burden of the firm (Jensen and Smith, 2000; Klock et al., 2005; Bekaert and Harvey,
2002).
de Paula et al. (2012) state that debt security issuances carry some risk factors, and therefore, call for management processes that
ensure the issuer's ability to pay. Bhojraj and Sengupta (2001) and Cremers et al. (2004) point out that the adoption of internal and
external corporate governance devices can result in lower debt capital costs by reducing the default risk, obtained from the smallest
occurrence of agency conflicts and information asymmetry between agents, in addition to an improvement in the internal control of
the firm. These are complemented by Al-Najjar and Clark (2017) and Ghouma's (2017) works that provide evidence of the positive
influence of internal and external devices of corporate governance practices on the companies’ financial decisions, and terms of
issuance and/or debt rollover, particularly its costs.
This article specifically deals with Brazil and India, analyzing how the corporate governance structures (CGS) of these nations and
their companies contribute to the development of the private debt of local markets. The selection of these two countries in the BRICS
is based on the strong presence of the state in the economy that suggests the existence of patrimonial and clientelistic relations that
interfere decisively with capital market planning, in particular, with one's debt size. South Africa, for instance, has nascent capital
markets before their peer group and therefore was not taken as a potential object of analysis of this research.
Compared to Russia and China, India suggests having more transparent conditions for its companies to operate in its capital
market, similar to Brazil. Two reasons show the convergence between these: first, the opening of the international market move made
by both in the early 1990s, and second, the predominance of corporate financing that the banking system exercises, especially the
public, but with recent efforts to broaden participation in this dynamic.
In this sense, this work joins the perspective of agency theory as proposed by Shleifer and Vishny (1997). For the authors,
governance deals with the mechanisms that would ensure the return on their investment for capital suppliers. Thus, the research
focuses on examining the built-in governance in the issuance of corporate debt securities of Brazilian and Indian companies, by
quantifying the CGS that tends to affect the quality (represented in the form of compliance) of debt securities and the possibility of
noncompliance with issuing terms (de Paula et al., 2012).
Such “quality” of corporate debt issues will be verified by applying the index developed by Economic Commission for Latin
America and the Caribbean (ECLAC) in conjunction with the La Corporación Andina de Fomento, or Development Bank of Latin
America (CAF) and the Inter-American Development Bank (IDB), which was originally applied to companies’ corporate debt issuers
selected in Brazil, Colombia, and Mexico.
Galindo (2012), the researcher who developed the methodology of this index, affirms the usual governance index based on
financial and accounting measures do not reflect the risks associated with a company's quality management which, in turn, depends
directly on the effectiveness of its corporate governance structures and its internal control systems.
In this sense, the index proposed by the author contains parameters that incorporate the expensive aspects of a process of
corporate debt issuance, primarily relating to the composition and performance of the Board of Directors and some corporate
committees, notably those related to the prediction of the potential risks of this issue. The index consists of questions grouped into
eight categories, to which reference notes are assigned (benchmark), and the answers must follow the fulfillment of logic but not the
respective treaty aspect, so that failure is not formal adoption of question of governance under consideration and the consequent
effectiveness of the underlying potential of this, which implies negative consequences for the company and its ability to pay.
The index thus does not seek to evaluate the full and broad performance of corporate governance, but simply serves as a measure
to establish which aspects should be strengthened by the companies so that the risks involved are minimized in a debt issuance
process and the shape and placement of these securities are given in more appropriate conditions.
Hence, the research problem that guides this work is presented as: What is the formal CGS of the debt issuers selected according to
the ECLAC index? This questioning is aligned with the implementation of the index, which includes corporate governance provisions
that are considered important in the process of debt issuance in order to examine the quality of issuances.
The objective is to identify the CGS related to the private debt issuance process that was formally adopted by issuers in Brazil and
India at the end of 2013, by applying and discussing the ECLAC index results in all cases of this research. Specifically, a study of

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multiple cases is done, observing debt issuance in Brazil and India to identify if these companies are concerned with corporate
governance aspects.
The analysis of debt issuance in multiple cases suggests better compliance practices and more robust structures of corporate
governance (at least from a formal point of view) with their bonds by defaulted companies than with those by non-defaulted
companies. Alternatively, the opposite can be inferred, i.e., the issuers with rigorous governance structures have higher chances of
meeting their obligations. However, it should be noted these cases did not show a pattern in essence, but issuers who obtained high
scores have problems with these structures.
This background of the corporate debt market in the two countries shows this segment requires further efforts in the field of
regulation and self-regulation in order to consolidate itself, on the one hand, as an important corporate financier, and the other, as a
safe alternative investment to the plaintiffs in these roles. For this condition to be achieved, it is necessary that companies and
countries enhance their structures and corporate governance practices aiming to reduce conflicts of interest between creditors and
shareholders/managers, providing better conditions for the private debts.
Therefore, this research contributes to the theoretical debate about the relevance of corporate governance mechanisms’ abilities
to mitigate conflicts between shareholders and creditors and, by extension, the debt agency costs, not least because the literature does
not often recognize the potential importance of conflict between creditors and shareholders/managers.
Furthermore, this research explores the topic in order to contribute to the debate on the challenges that remain, which are to
promote the secondary market and transparency of emissions, deepening the debt market as an alternative source of funds to
companies, and the strengthening of institutions and corporate governance regulations underlying the process of issuing debt, among
other things.
This article is divided into five sections besides this introduction. In the next section, we develop a theoretical framework. Section
3 describes the methodological aspects of the research. Cases, results and analyses are presented in Section 4. The final considerations
are woven into Section 5.

2. Theoretical background

This section presents the aspects that constitute the theoretical framework of this research, which will be the basis for examining
the relationship between corporate governance and the issuance of debt securities for two emerging economies: Brazil and India.
First, the paper will address the nuances of the existing agency conflict between creditors and shareholders as well as address the
CGSs of the two countries that are aimed at ultimately combating such conflict. The following presents the current situation of the
issuance of corporate bonds in Brazil and India.

2.1. The agency relationship between shareholders and creditors

In the context of the separation of ownership and control, and therefore the contractual notion that involves the relationship from
that moment, comes into existence an agency relationship. Jensen and Meckling (1976) were the first to present the agency theory,
broadly defining an agency relationship as a ‘contract in which one or more persons – the main – indicates someone else – the agent –
to perform some activity in your favor’.
The fourth section of Jensen and Meckling (1976) addresses the agency conflict between creditors and shareholders and their
related costs, the so-called ‘debt agency costs’. According to the authors, the shareholders can take advantage of ‘selfish strategies’,
based on encouraging the assumption of higher risks when using third-party capital and under-investment in an imminent bank-
ruptcy, in addition to emptying the property in order to expropriate wealth from creditors.
Research such as Li et al. (2014), Liao et al. (2014), Claessens and Yurtoglu (2013), Klock et al. (2005), Cremers et al. (2004),
Bhojraj and Sengupta (2001), Jensen and Smith (2000) indicate that a more robust governance tends to mitigate the risk of debt
default because of the chance of the occurrence of agency conflicts and improvement in internal control. This basically occurs,
according to Li et al. (2014), when the largest and most capable board of directors creates conditions for lenders an assessment of
improved monitoring capacity about the company.
Cremers et al. (2004) address the influence of governance on the broader form of the debt issuance process, stating that the
internal and external governance devices affect the cost of debt via the channel of most past credibility to lenders who require the
company a lower premium.
Al-Najjar and Clark (2017), in a study of 430 non-financial companies in the Middle East and North African during 2000–2009,
have shown the importance of internal devices (size of the board and independence of its members, ownership structure and control)
and external (current rules in the country, such as governance codes, transparency of fiscal policy, legislation and banking super-
vision) of corporate governance to the financial decisions, especially for holding cash (or not). As a result, the authors highlight that
these corporate governance mechanisms at appropriate levels are critical in the resolution of conflicts between shareholders and
managers.

2.2. Corporate governance in Brazil

The improvement of corporate governance practice efforts to combat agency conflict in organisations can establish some im-
portant milestones. In 1995, the Brazilian Institute of Corporate Governance was founded, placing the country in a broader movement
of nations that have come to recognise the importance of governance practices and therefore encouraging the creation of institutions

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for debating the topic (de Paula et al., 2012; Silveira, 2014).
The Brazilian Securities and Exchange Commission (CVM) published non-compulsory governance conduct terms, demonstrating
the different levels of corporate governance by the São Paulo Stock Exchange (BM & FBovespa). Black et al. (2010, 2012), Bennedsen
et al. (2012), de Carvalho and Pennacchi (2012) point out that the new listing segment of BM & FBovespa, which demonstrates the
ability of a stock exchange to occupy the space left behind by the legislation, still fails in the country and provides the important
system of governance devices. In addition to the initiatives taken within the institutional framework, also highlight the actions that
took place in the Brazilian legal apparatus, namely: Brazilian corporate law; bankruptcy law aimed at offering greater legal certainty
to creditors; and laws related to the alignment of Brazilian accounting practices to international ones.
With specific regard to the bankruptcy law, its update promoted harmonization of the Brazilian process of international standards
business recovery, imposing changes related to: (i) replacement of bankruptcy for bankruptcy protection representing creditor
participation in an eventual recovery plan, (ii) creation of the extrajudicial recovery event, which favors the adoption of informal
agreements between the parties, (iii) invocation of the General Meeting of Creditors, which tracks bankruptcy protection, among
other things. In sum, the legislation to protect the creditors has brought more transparency and predictability to the pre-bankruptcy
and bankruptcy proceedings.

2.3. Corporate governance in India

On the other side of the world, India was marked by government policies that provide for a significant state involvement in IPOs
and in almost all aspects of business management. The period opened in the 1990s was the demobilization of the socialist state
apparatus mounted after independence and the establishment of new regulations and institutions in order to monitor the capital
market of that country (Varottil, 2012; Bhardwaj, 2011; Armour and Lele, 2009; Afsharipour, 2009; Black and Khanna, 2007;
Chakrabarti, 2005).
At this point, in response to the severe fiscal crisis facing the country in 1991, India began a period of liberalizing reforms that
determined the modern development of the stock market and corporate governance provisions of the country. The main landmarks of
this movement were assigned to extinction in the 1991 of Law 1951 and the creation of a new regulatory body of the capital market,
the Securities and Exchange Board of India (SEBI), in 1992 (Khanna and Palepu, 2005).
The relevant milestone that followed was the enactment in 1998 by the Confederation of Indian Industry (CII), of the Corporate
Governance Code. The initial proposal IIC measures were recommended only for large companies, so that adoption by other com-
panies ended up being voluntary. The following year SEBI announced the formation of the Kumarmangalam Birla Committee
Committee (KMBC), which would also propose corporate governance reforms.
The reforms proposed by KMBC became known as ‘Section 49,’ because they were established in the form of an addendum to the
listing agreement of stock exchanges through the inclusion of a new clause numbered 49th (Jetley and Mondal, 2015). Black et al.
(2010) and Pande (2011) asserts this movement was a watershed when it comes to corporate governance in India.

2.4. Corporate debt market

This paper deals with the issue of corporate debt securities due and their preference in the hierarchy postulated by the pecking
order theory when it comes to funding fulfilled by third-party funds (Myers, 1984). In addition to the preferred position described by
this theory, Maurya and Kumar (2012) highlight the capacity of this market, both in its government bond segment and in corporate
debt, to leverage the financial system of an economy and produce positive effects in the real economy.
Ghouma (2017) examines the influence limits of good corporate governance practices on corporate debt, in particular the re-
lationship between the lowest level of opportunistic management and the combination of lower cost of corporate debt and better
rating companies. The author adopts entrenchment of managers and management results as proxies for managerial opportunism and
concludes this opportunism positively affects the cost of private debt and has negative impact on debt issuers’ ratings. Moreover, the
author examines the influence of regulatory changes, more specifically the issue of the Sarbanes-Oxley Act in the US, on the behavior
of private debt holders and the rating agencies, which become more diligent and active with the changes promoted by particular
legislation such that promote good governance practices by issuers.
Pour (2017) examines the determinants of the timing to the primary corporate debt issuances in crises times through the analysis
of issues of not convertible debt securities for private and public companies in the United Kingdom between 2007 and 2011. The
conclusion is that the costs of agency in the form of underinvestment and information asymmetry reduce the likelihood of primary
debt issuances.
Despite the importance of this market for the dynamics of the financial system and the economy, what ultimately prevails in Brazil
and in India are the government bond markets: about 18% of the total Indian debt market in 2012 amounted to issuances of corporate
bonds (Maurya and Kumar, 2012); and private debt securities accounted for about 17% of the entire Brazilian debt market in the
same year.
Fig. 1 shows that debenture issuances in 2013 accounted for about half of corporate issuances in Brazil, and that they are
introduced more widely than other instruments since the mid-1990s, except for the 2007–2010 period known for a boom of initial
public offerings of shares in the country. By comparison, Real Estate Receivables Certificates (CRIs), Stocks, Securities and shares of
Receivables Investment Funds (FDICs) are shown as well.
The rising issuance trend seen in corporate bonds since economic stabilization can be seen, too, as attributable to companies’
needs for searching out external resources in complement to self-financing, given a context of growth of its activities.

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Fig. 1. Public offerings of selected securities (BRL$ millions).

Moreover, the increase in the volume of debentures (debt) distributed should be interpreted in light of two aspects: (a) the
presence of banks in issuances through its leasing companies; (b) the CVM Instruction # 476 update in 2009.
The first aspect originates in the regulatory constraints imposed on banks by the Central Bank (BC) that prevents the issuance of
debentures. In general, the financial conglomerates have leasing companies, which were used in the period to capture free resources
of reserve requirements in the form of debentures. Between 2005 and 2008, a period marked by a representative volume of debenture
issues in Brazil, leasing companies accounted for 68% of total distribution.
The second aspect to be considered is the publication of a new guiding instruction of debt issues in 2009. This measure was
enacted to regulate public distribution of debentures and promissory notes under the regime of ‘restricted efforts,’ i.e., offers to put a
maximum number of twenty investors may be offered to a maximum of fifty potential buyers and therefore subject to more flexible
rules.
It turns out that, to some extent, the public debt market still limits the growth of the private debt market. Despite the increased
participation of the private debt segment in terms of GDP as of 2005, as shown in Fig. 2, possibly a greater expansion of the private
bond market was discouraged by the scope of the government securities market.

Fig. 2. Reserve of public and private securities as % of GDP in Brazil.

Adapted from Mukherjee (2012).

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In addition, Paiva and Savoia (2009) point to the low liquidity in this segment as limiting its development. Therefore, it is noted
that some general characteristics of the Brazilian private debt market – predominance of securities tied to the DI (interbank deposit)
rate, reduced set of investors, less dense secondary market, among others – have repressed its operation and development, parti-
cularly when compared to the segment of public debt.
Given this, some measures within government and self-regulatory policies have recently been undertaken to promote private debt
as long-term financing mechanism in Brazil. From the perspective of interventions, within the legal apparatus there was issued in
2011 a law aimed at establishing a tax system that was more favorable to investments in financial assets. The measures adopted at the
time included changes in the law of income tax, creation and improvement of so-called Infrastructure Funds (FIP-IE) and easing of
debentures legislation, financial notes and FDICs.
At the same time as the enactment of this law, the National Association of Financial Market Institutions (ANDIMA) created the
New Fixed Income Market (NMRF). The initiative was taken in order to promote the fixed-income segment of the capital market as an
alternative financing source for Brazilian companies, especially as long-term debt, taking advantage of the concept of self-regulation
of the market. In addition, ANBIMA launched in October 2011 the Regulation and Best Practices Code of NMRF for strengthening the
concept of self-regulation of this capital market segment.
In India, the liberalizing reforms of the 1990s had the goal of integrating the country into the global economic scene through the
promotion of its capital market, which was due to the enactment of laws based on the English model and therefore proven in essence.
Vasudev (2007) defines the action as a ‘revolution in the Indian capital market’ because of its potential to drive it to become a central
institution of state and national importance.
Chakrabarti (2008) and Mukherjee (2012) claim that the changes implemented have heightened important effects on the Indian
stock market, putting it in a prominent position at the regional and global levels. However, according to the authors these advances
did not extend far enough to satisfy the corporate debt market in that country.
Mukherjee (2012) states that the bond market is still underdeveloped in India and dominated by government bonds – the gov-
ernment bond market is almost 34% of GDP, while the corporate debt market is about 6% of GDP – which is reflected in a significant
financing gap of some industries, especially those related to infrastructure. The chart presented in Fig. 3 illustrates this finding. In a
sense, the author points to the greater reliance on resources provided by the Indian banking system for corporate financing.
In short it is observed that the Indian debt market does not also move the stock market, government bonds dominate the country's
debt market, and the importance of the role played by the banking system in corporate financing dynamics for some companies
having difficulties accessing resources.
Note, therefore, that corporate financing in both countries is exercised mostly by the banking system and that their total debt
markets have broad participation by public debt. However, Brazil and India have undertaken efforts to improve their regulatory
framework and facilitate the issuing process for companies seeking access to the private debt market.

2.5. ECLAC index

Corporate governance practices can bring more transparency to the risks inherent in business operations and allow the issuance of
debt securities carrying better terms. This last aspect is justified by the fact that disclosure of risks to investors are manifested in the
adoption of good corporate governance practices, which tend to reduce financing costs.
In this context, Galindo (2012) developed an index as part of a study (conducted by ECLAC in conjunction with the CAF and the
IDB) concerning identifying the core elements of corporate governance in determining the risk of a debt issuance. This index was

Fig. 3. Reserve of public and private securities as % of GDP in India.

Adapted from Mukherjee (2012).

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tested in selected cases of Brazil, Colombia, and Mexico. This study took place in a way that was complementary to the purpose of
research conducted previously by ECLAC and CAF in 2008–2009, called “Gobernanza corporate y desarrollo de los capitales markets
in Latin America,” where both are based on the context of deepening governance discussions in Latin America and their impact on the
development and growth of the capital market in the region.
Galindo (2012) points out that the traditional models of credit risk analysis related to corporate debt issues are mainly focused on
financial ratios, which consider accounting information and, therefore, reflect the past performance of a company. Other indexes
allow us to estimate the future benefit arising from box business activity and compare them to the payment plans of corporate debt
with regard to measuring the risks inherent in these emissions that are merely related to a company's ability to pay.
However, to the author, these measures do not fully reflect the risks inherent in debt issues because they do not consider the risks
relating to quality management, which, in turn, depends directly on the effectiveness of internal control systems. Specifically, the role
of corporate governance bodies of the companies and the impact of the functioning of these structures on the issues of debt securities
are elements that tend to be overlooked in conventional risk measures.
Galindo (2012) sought to index these overlooked risk measures, therefore, contemplating parameters that portray these aspects
and act as index's showing the potential risks related to the establishment and operation of corporate governance structures that, if
confirmed, may adversely and decisively affect the future of an issuing company and its ability to fulfill its obligations.
The index proposed by the author emphasizes the quantification of corporate governance practices directly related to the issuance
of debt securities, particularly with respect to mitigating the risks inherent to these emissions, to the extent that their attributes have
the potential to facilitate the analysis of the evaluators risk. Therefore, the index is not intended to assess the full and broad per-
formance of corporate governance, but simply serves as a measure to establish which aspects should be strengthened by companies to
ensure the risks involved in a debt issuance process are minimized and thus, obtain better conditions of placement for these titles.
The index is composed of items related to the evaluation of processes and generation of devices and transmission of internal
information, the identification of a structure able to avoid conflict of interest between executives and corporate boards, and the
improvement of internal and external compliance mechanisms regarding combating the risks of debt issuance. Eight categories are
established based on a set of responsibilities assumed by the boards of directors and some corporate committees, verified through
items to be answered, as shown in Table 1 (Galindo, 2012).
It is noted from Table 1 that the author highlights the role and structure of the Board of Directors – selection of internal and
external directors – and identifies corporate committees as relevant in the debt issuance process. All this hierarchical effort of
corporate governance mechanisms as their degree of relative importance in mitigating the emissions of risk gave rise to the de-
termination of each premise's amount of weight and then the assignment of reference values for each issue of the index.
The index was not structured to assign grades or the degree of compliance of the devices that comprise it, but work in binary form
of the “meets” or “does not meet,” (i.e., informs if the company considers relevant [or not] any particular item in the functioning of its
corporate governance structure). All groups described in Table 1 are involved with research questions and present themselves in the
form of questions in such a way as facilitate the assessment of compliance: a positive response means compliance with the standards
established by the index and assigning the reference value in its totality; a negative response indicates the failure and assigning a zero
score for the item in question. All summed reference values total 10 points that define thus a complete fulfillment stage of standards
established in the index.
The adoption of aspects with identifiable effects (direct or indirect) on the issuing procedures of corporate bonds and the shape
that was formatted (“comply” or “non-comply”) ensures that the index provides knowledge to companies about the guidelines that
must be observed by its corporate governance bodies to show and eventually mitigate the risks related to debt issues and investors,
and more detailed information on the risks effectively incurred by companies.
Table 2 shows the grouping of the reference values (benchmark) for each category of content, which have been selected and fixed
after a review of international indexes according to Galindo (2012). The scale assigned to the items of the category “selection of
directors (internal and external)” and “board” shows the representation of this set of elements for the index as a whole, given that
together they account for about 42% of the index weight.
The purpose of study for this index, developed by ECLAC, seeks therefore to show to what extent the selected cases of corporate
debt issuance in Brazil and India met the standards set by the measures and, depending on the degree of adherence to this reference
set by the index, managed to mitigate the risk related to the default of its debt securities.

3. Data and method

This study is guided by a mixed qualitative and quantitative approach. The qualitative approach is represented by the char-
acterization of issuers from the point of view of the corporate governance structures adopted, and the quantitative approach is
manifested in the use of a numerical tool, the ECLAC index, to quantify the governance structure of companies on a specific scale.
The sample data was collected from CVM, ANBIMA, the SND, and the BM & FBovespa to Brazilian. In the case of India, the sources
were SEBI, NSE, BSE, and rating agencies, like CRISIL and ICRA. Corporate data are available in issuance prospectuses, reference
forms, corporate governance yearbooks and financial statements.
For examining the relationship between corporate governance structure and performance of debt issues in both countries,
companies were selected that showed partial or total default issuances, and companies that have fulfilled the agreed terms. This
criterion shows to what extent the formal adoption of certain governance structures for companies contributed to mitigating the risks
inherent therein, a fact manifested in the form of compliance with the terms of issuances.
The criteria for selection of issuing companies was predominantly the industry, with the pairing between the two countries

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Table 1
ECLAC index description – main aspects observed on it.

Item Features

The role of the Board of Directors: Establishing mechanisms to ensure timely and reliable information on investment activities and corporate
financing;
Delegating responsibilities and functions; and,
Allowing the president to be an independent director.

Structure of the Board Should have a size that allows action to be agile and to effectively make decisions.

The President of the Board of Directors Should be an independent director; and,

Establishes mechanisms for selecting board members by considering the value they can add to the company.

Key goals in the selection of internal and
external advisors
Board members selected based on the value they can add;
Keep up to date on the needs of the company and its employees;
The external directors must disclose any conflicts of interest;
The number of external directors must exceed the number of internal directors;
The majority of external directors must be independent;
Internal directors should be responsible for legal and criminally relevant information on a bond issue and its
implications for the financial situation of the company; and,
The internal audit director should be a member of the Board of Directors and report directly to the Board of
Directors or the Audit Committee.

Corporate Finance Committee To be chaired by an independent director with experience in corporate finance;
Determines of funding requirements;
Develops risk reports on emissions of the company's debt securities; and,
Act in hiring financial intermediaries required to issue financial bonds.

Investment in Financial Assets Committee To be chaired by an independent director with experience in financial markets;
Develops and periodically reviews the company's investment strategy; and,
Develops financial risk reports on investments in financial assets.

Audit Committee To bechaired by an independent director;

The external auditor is appointed by the Audit Committee and reports to it;
Develops the external and internal audit program;
Creates a system to effectively communicate information about the company's financing; and,
Issues periodicreports on compliance with the internal control policies and the use offinancial resources.

Risk Committee To be chaired by an independent director with experience in risk management;

Prepares reports on the financial and non-financial risks facing the company and approves plans for their
treatments;
Monitors the reports, of debt issuance risk, proposed by the Corporate Finance Committee;
Monitors financial risk reports proposed by the Investment Committee on financial assets;
Hires rating agencies and receives periodic evaluations of the issuances of debt and financial instruments
portfolio of the company; and,
Reports the compliance and effectiveness of the investment strategy performed.

Table 2
Index benchmark matrix.

Category Score

Directors’ Selection (internal and external) 2.079

Role to Board of Directors 2.075
Audit Committee 1.885
Corporate Financing Committee 1.508
Risk Corporate 1.508
Role to Board of Directors Chairman 0.566
Investments on Financial Assets Committee 0.285
Board of Directors Structure 0.094

Total 10.00

analyzed, together with the availability of information. This criterion was adopted in the study that motivated this research, de-
veloped by de Paula et al. (2012), which also applied the ECLAC index in selected cases of corporate debt issuance in Brazil. The same
criterion was adopted by Sanin and Arteaga (2012) and Langle (2012), which applied to selected cases of Colombia and Mexico,
respectively.
In addition to industry, the pairing between the issuing companies occurred as the situation of compliance or not, the terms of the
issue, (i.e., default – total or partial, or renegotiate the payment of interest and/or amortization – and due performance), two cases of
each category of those for Brazil and India. In this sense, the companies analyzed can be segmented as follows: (i) non-defaulted:
Usiminas and Tata Steel, belonging to the steel industry, and GOL SA and Air India in the air transport sector; (ii) defaulted: Inepar

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S.A. and TECPRO Systems, the sector of industrial machinery and equipment, and Construtora Sultepa and B Infrastructure in the
construction and engineering sector.
The analysis proceeds in order to obtain elements relating to due performance (or default) relative to the corporate governance
structure formally adopted by the issuer. However, any consideration that is made about the notes could not be processed in the field
of inference, as these notes do not reveal correlations between governance and debt behavior.
It is important to note the current corporate governance structure was in December 2013, regardless of when occurred the debt
issuance or default. In the case of defaulting companies and current issuances, this current assessment is important because it has the
commitment of the station towards the debenture holder in certain requirements for transparency and control. This assessment is also
useful to show delinquent companies in existing issuances, or already canceled, because it indicates how much a company in-
corporated good governance practices, which have the potential to establish a new approach to private debt market.
Another relevant aspect refers to the thrift that was adopted to answer the questions of the index, that is, if the answers to the
items were not clear in the documents reviewed then they were assigned as zero. The fact that the company did not mention the
information, suggests the need for changes in the way these documents are be prepared. Finally, it performed the calculation of the
indices of each company in the sample, which will be compared to the benchmark (Table 2), allowing for discussion about the
effectiveness of the ECLAC index in making comparisons between companies in different countries.

4. Results and discussion

Regarding the objective of this paper, namely to evaluate the corporate governance structures related to private debt issuance
process that were formally adopted by issuers in Brazil and in India in December 2013, by applying the ECLAC index. Results are
summarized for the following four cases in each country in order to evidence some of its nuances.

4.1. Brazilian cases

4.1.1. Usinas Siderúurgicas de Minas Gerais S.A. – Usiminas S.A.

In the Reference Form published in 2013, the company states that it systematically monitors business risks with the potential to
adversely affect its operations and results. More specifically, the company reiterates that it seeks to reduce its exposure to exchange
and interest rates and sharp fluctuations in commodity prices through protection practices (notably hedge, currency swaps and
interest rates), as part of its financial policy adopted in 2009.
In addition, the company adopts a corporate governance model that complements their risk-control efforts through some planned
practices, namely the ongoing maintenance of an audit committee, and human and auditing resources committees (both established
in 2007), in addition to the statutory boards and the Board of Directors.

4.1.2. GOL Linhas Aéreas Inteligentes S.A.

Documents (basically the prospectus) relating to debentures and senior-notes offerings made by the company since 2006, com-
panies’ reports (reference forms, annual reports and 20-F reports issued by the SEC) and trustees agents show that the compliance of
contractual obligations is subject to certain risks. Some concerns are clear: losses incurred in previous years, macroeconomic in-
stability, substantial fluctuations in fuel prices, changes in the regulation of Brazilian civil aviation, among others.
In 2013, the rating agency Fitch expressed concern about the impact of lower operating profits in 2012 and higher leverage on the
strength of the company, which led it to downgrade its B+ credit rating to B− that year. This means that one of the listed risk factors
(‘losses incurred in previous years’) has real potential to affect the conditions for the company's debt and compliance.

4.1.3. Construtora Sultepa S.A.

The company held four debenture issuances throughout its history, and in three of these programs there took place renegotiation
and to default on interest installments and/or amortization of debt. Between mid-2004 and April 2013, Sultepa presented at the
Annual Meetings of Debenture Holders (AGD) thirteen proposals for changes in the terms of the debentures, either in the com-
pensation payment flow and/or principal, or in the collateral security provided in the second and third issuances. In the face of
repeated breaches of the interest payments, amortization and its own installment agreements, these default events show the analysis
of the current structure of corporate governance is necessary. The reference form published in 2013, specifically in the Description of
Market Risk Management Policy section, pointed out the company's overall risk management program is based on the unpredictability
of financial markets and seeks to mitigate potentially adverse effects on their performance. In practice, the company does not show in
their official documents which measures it adopted to effectively mitigate the risks.

4.1.4. Inepar S.A. Indústria e Construções

The second (which occurred on February 1, 1996) and third (held on November 30, 1996) debenture issuances had a history of
postponements of payments, unfulfilled renegotiation and default interest payments, amortization, and specific premiums. Originally
maturing in February 2001 – but with a postponement of payment history between 1998 and 2000 – the second issue made the
Meeting of Bondholders (MB) in January 2001 approve a planned renegotiation of the outstanding balance (Pentágono, 2014).
The third issue experienced a trajectory similar to the second one. Issued in November 1996 and initially stated maturite in
November 2001, the issue went through successive postponements, late payments and even defaults charges and principal. The
formal renegotiation of debt was discussed at the eighth MB in May and June 2010, and was approved. Finally, 35,000 debentures of

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the second issue were fully paid by December 2013, as were 25,000 debentures of the third issue.

4.2. Indian cases

4.2.1. Tata Steel Limited

Documents released by the company when its issuances (known as Information memorandum, [IM]) as well as its 2013–2014
annual report highlight the risks related to its activity and, therefore, should have been considered by potential investors. In sum, the
threats to this company were related to the cyclical behavior of the steel industry and its prices, the difficulties of entering into
operating agreements, debt incurred by the acquisition of functions of other companies, and exchange rate behavior, among others.
As part of its growth strategy in the Indian and global markets, the company started to invest in a major way from the end of the
1990s in the adoption of ‘best practices’ of corporate governance in all of its units. The Board of Directors assumed leadership in this
context due to the company's understanding that this structure “manages the interests of shareholders and recognizes its responsi-
bilities with regard to creation and preservation of their wealth’ (TATA STEEL, 2013).
Tata Steel demonstrates that it takes into account a considerable part of the corporate governance recommendations, included in
Clause 49 of the Listing Agreement, which confirms its effort towards self-regulation.

4.2.2. Air India Limited

The standouts in the recent history of the company are two important milestones in their level of corporate governance: (i)
implementation of the Pact Program for Integrity in February 2008, by which it became essential to include health requirements in all
contracts with a value equal to or greater than 100 million rupees; (ii) since March 2010 it has become mandatory to include
independent directors on the Board of Directors. The corporate governance structure of the company was formalized in ‘Manual 8,’
defined by it as ‘a statement of boards, councils, Committees and other bodies constituted.’ (AIR INDIA, 2010).

4.2.3. OB Infrastructure Limited

Seeking to equalize the payments of outstanding loans and strengthen working capital, the company held its first issuance of
debentures in February 2014. The program consisted of the private placement of 3.49 billion rupees in non-convertible debentures,
issued in a series of four (A, B, C and D) and with semi-annual payments to run from March 2014 onward.
In an analysis of OB Infrastructure published in April 2014, CRISIL highlighted the significant improvement in the company's
working capital level due to the distribution of debentures, which allowed the settlement of more expensive bank liabilities and
strengthening of the box.
The rating agency warned, however, that this benign scenario immediately after the issuance of debentures may not fully cover
some risks that should be considered by the holder of such obligations and the company. Essentially, such threats relate to the
increase in operating costs, the likelihood of unexpected activity maintenance and, above all, to some event that affects the biannual
transfer made to Indian government.
After five days of original maturity of this series of debentures, fixed on 15 June 2014, bonds worth 11.9 million rupees were
settled. Despite the short delay, there was the issue of risk factors materializing and affecting the fulfillment of its terms, probably
because of some weakness in the governance apparatus of the company. The firm, in turn, has a board of directors composed of only
five members, and a supervisory board with two members and directors related to technical and financial areas.

4.2.4. TECPRO Systems Limited

Prospectuses and IM edited by the company point out as potential business risks and their issuances the judicial and adminis-
trative proceedings in progress, the increase in the cost of raw materials, and the high degree of exposure/dependence on certain
customers, suppliers and operational arrangements, among others.
The issuance in September 2008 of commercial paper held by the company received an A1 rating by the CRISIL credit rating
agency, but has since suffered successive downgrades due deterioration in macroeconomic conditions over the period. In July 2013,
the credit rating of these securities was downgraded by the agency to A4+ in consequence of delays in the payment of interest on
these bonds as well as bank guarantee operations.
The 2012–2013 Annual Report states that the company has a policy of maintaining a permanent control over the risk factors to
which it is subjected, in advance taking steps to mitigate the risks that may affect its performance. In this sense, we must analyze the
company's internal control system and corporate governance structure that control this effort to mitigate risks.
In the case of TECPRO, where the growing need to resort to debt to finance of their activities brought with it greater financial risk;
providing the company with good corporate governance practices tends to be an effective tool in combating the most-associated risks
and possible deleterious effects of this on the company's ability to finance itself via the debt market.

4.3. Index analysis applied to selected cases

The index developed by ECLAC considers aspects of corporate governance that can affect the process of corporate debt issuance,
primarily with respect to risk and terms of emissions (price, interest rate, and maturity). As stated above, the questions whose
answers were not explained in the various sources used were assigned a zero.
Table 3 presents the issues found in the ECLAC index and the related notes obtained by each company, divided into ‘non-
defaulted’ and ‘defaulted,’ and by countries, resulting in eight different sets. The interpretation should be ‘bigger is better,’ i.e., the

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Table 3
Summary of scores found by company in comparison with each other and the benchmark (reference).

Category Benchmark Defaulted Non-Defaulted

Inepar Tecpro Sultepa OB Infra. Gol SA Air India Usiminas Tata Steel

RCM 2.075 1.131 1.131 0.754 0.754 1.508 1.131 1.508 1.697
CMS 0.094 0.031 0.094 0.031 0.031 0.062 0.062 0.062 0.094
RPCM 0.566 0 0 0 0 0 0 0.566 0
CRS 2.079 0.189 0.378 0.189 0.189 0.946 0.378 0.567 0.567
AC 1.885 0 0.377 0 0 0.377 0 0 0.754
IFAC 0.285 0 0 0 0 0 0 0 0
CFC 1.508 0 0 0 0 0 0 0 0
CR 1.508 0 0 0 0 0 0 0 0
SCORE 10.000 1.351 1.98 0.974 0.974 2.893 1.571 2.703 3.112

closer the reference (maximum score 10) is the company's grade, the more appropriate it can be considered its governance related to
the issuance of debt securities process.
Strictly speaking, the aspects related to the performance of corporate committees (audit, investment, corporate finance and risk)
have the most significant traits, as shown in Table 4. Only GOL S.A. and Tata Steel companies, grouped under ‘in default,’ and
TECPRO Systems, classified as ‘defaulted,’ have at least one item of the index score above null. The other companies have obtained a
zero score in all these categories. In cases where committees are installed and the score is zero, the functioning of these structures can
be negatively affected because of the failure to adopt the best practices.
Note that the most common committee among all companies is the audit committee, being given a permanent status, and that the
defaulting companies in general have at least two installed committees. Only Construtora Sultepa, Inepar and OB Infrastructure
ended the year 2013 (and previous years also) with no committees formed, which is precisely why they are the companies with a
history of default or late payment of debentures and commercial papers.
Considering the total scores of the companies, we observe that the gap in relation to benchmarking the average of all notes found
was 1945, and the companies belonging to the group ‘defaulted’ had an average higher than the ‘non-defaulted’ companies, 2570
against 1320 (see Table 5 for more details). However, there were not applied any mean differences or other equivalency tests to
examine the statistical validity of the absolute difference. In any case, even without the statistical proof of the mean difference
between the two groups, the information collected and applied to the indicator suggests better compliance (at least from a formal
point of view) with best practices in corporate governance in non-defaulted than in delinquent companies.
In any case, even without the statistical proof of the mean difference between the two groups, the information collected and
applied to the index suggest better compliance (at least from a formal point of view) with the best practices of corporate governance
in non-defaulted companies than the defaulted ones. Eventually, the opposite can be inferred, that is, issuers fulfill their obligations
precisely because they are endowed with a more robust structure from the governance point of view.
When taking individual cases, as can be seen in Table 3 we highlight GOL S.A. and Tata Steel as the companies with the highest
scores (2893 and 3112 respectively), and Construtora Sultepa and OB Infrastructure with the lowest – 0.974 for both.
GOL S.A. and Tata Steel can explain their higher scores, as follows: (i) they have an audit committee chaired by an independent
director; (ii) they delegate to the audit committee the control of issuances of risk reports (Tata Steel only); (iii) they have training
programs for directors (GOLS.A. only); (iv) they periodically review the performance of each external director (Tata Steel only); (v)
they have three or more external advisers (GOL S.A. and Usiminas); (vi) they have an independent director as chairman of the audit
committee (GOL S.A. and Tata Steel); and, (vii) they prepare internal and external audit plans (Tata Steel).
The results of the index demonstrate alignment to academic literature in the sense that they highlight companies with an ap-
propriate level of governance that have more favorable conditions in which to issue debt and to honor those commitments. This
conclusion can be complemented by the assessment of interest rates on the existing debts of these companies. Both GOL S.A. and Tata
Steel have succeeded in making issuances with fixed interest, which stand as exceptions given the Brazilian reality in which most

Table 4
Corporate committees’ attendance at each company.

Company Situation Committee

Audit Investments Financing Risk

Usiminas S.A. Non-defaulted √ × √ ×

GOL S.A. Non-defaulted √ × √ √
Sultepa S.A. Defaulted × × × ×
Inepar S.A. Defaulted × × × ×
Tata Steel Non-defaulted √ × √ ×
Air India Non-defaulted √ × √ ×
OB infrastructure Defaulted × × × ×
Tecpro Sys Defaulted √ × × ×

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Table 5
Summary of average scores found by different cohorts.

Cohort Average score

Defaulted companies 1.320

Non-Defaulted companies 2.570
Brazilian companies 1.980
Indian companies 1.909
Brazilian companies (non-defaulted) 2.798
Indian companies (non-defaulted) 2.342
Brazilian companies – defaulted 1.163
Indian companies – defaulted 1.477

bonds, in that they are indexed to the basic interest rate (SELIC) or this plus a fixed rate, especially in the case of GOL S.A.
The low scores may reflect not just the non-adoption of the aspects covered in the index (as with issues related to corporate
committees that assumed zero even in case of implementation of this structure), but to also a lack of transparency in relevant
information disclosure. In a case where no explanation was given, the answers were scored as zero. The scores indicate this might be
an explanation for this result.
The potential debenture holder incurs transaction costs when seeking information about the issuer and debt issuance. These costs
that can derail their demand for these debt securities and, ultimately, harm the development of the corporate debt market. From this,
it can be inferred that the non-adoption of certain aspects of governance, or simply the lack of clarity in the disclosure of such
information, can hinder the development of the corporate debt market for the companies analyzed.
However, the cases did not show such a pattern. Companies that obtained the highest grades did not default and continue to fulfill
the terms of their obligations. Despite that, problems in fixing their corporate governance structures deserve attention. Usiminas, for
example, presents a satisfactory formal alignment with corporate governance practices, but still recently had problems related to its
board's composition and its effective independence. In September 2014, for example, a dispute between the two main shareholders
caused the resignation of the president of the company and two senior executives.
Similarly, TECPRO Systems experienced reprogramming events in the payments of its debt, despite having obtained a higher score
than Air India In other words, compliance with the terms of the debt can be harmed even by companies that incorporate some of the
listed devices in the index. Precisely for this reason, it becomes important to periodically revisit the company's risk analysis, taking
advantage of corporate governance elements to do so.
In the case of Construtora Sultepa, despite the successive breaches of the terms of its issued debt, the company did not adopt a
more robust framework of corporate governance. The Inepar, by contrast, sought to signal to the market their inclination to adopt
best corporate governance practices by joining in March 2011 the Level 1 of BM & FBovespa to promote changes in the executive
management of the company precisely in compliance with the regulation of this differentiated level of governance.
Air India, in turn, presents as adhering to some of the Clause 49 recommendations, but the available annual reports, reports of the
board and the information provided in the prospectus of debt issues, do not show in detail the activities of the committees of the
board and the Board of Directors in debt placement processes.
In this sense, to resume the research questions of this study, the results indicate a distancing of the grades obtained by the
companies selected in relation to benchmarking of ECLAC index whose methodology was built by Galindo (2012). This detachment
even showed higher in non-performing companies, as expected a priori from the literature review.
It is worth noting the limits of ECLAC index, because it captures the formal and not practical observance of a given corporate
governance structure and not as an antecedent, that is, it has no predictive power. Therefore, the analysis of the results should remain
limited to the period (December 2013) and indicate only the distance in relation to a known and already validated scale (in this case,
the method proposed by Galindo (2012)).

5. Conclusions

An appropriate capital market placement of corporate debt securities shows an important investment fundraising locus and source
of working capital for businesses, representing a relatively stable and usually more suitable alternative, from a cost standpoint, than
the banking system (commercial and development), or even the stock market.
The main problem of the issuance process that carries some risk factors, which must of course be shared with potential investors,
relates to requirement by the issuer of the systematic adoption of certain corporate governance provisions for issuances in order to
deem the terms of risk, prices, and guarantees, among other elements.
Despite the historical prevalence of the banking system as a corporate financier of the public debt market to the detriment of that
of private debt in Brazil and India, where there can be observed a consistent increase in corporate debt issues, – the amount of
issuances has grown on average 28% per year in Brazil since 2009, according to ANBIMA, and about 24% annually in India since
2004, according to NSE. Even with the recent growth, the debt markets in Brazil and India ended 2012 accounting for only 17% and
18% of the total debt markets, respectively.
The expansion recorded for this market in Brazil can be attributed to the creation of the Differentiated Levels of Corporate
Governance by the former Bovespa in 2000 (Black et al., 2014; Bortolon and Leal, 2014), the new rules implemented by CVM in 2003,

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the issue of CVM Instruction 476/2009 that regulated the issuance of debt under restricted efforts, the improvement of structures
custody and settlement (BovespaFix, CETIP, etc.), and the New Fixed Income Market sponsored by ANDIMA, among other efforts
undertaken primarily to expand the governance of this market.
In India, expansion is fundamentally related to the enactment of laws in the early 1990s for the opening of the market, with the
aim of promoting integration into the global economic scene via capital markets, as well as self-regulation measures in the Pattil
scope of the Commission and of Clause 49.
However, the corporate debt markets had their growth limited or offset in both countries due to the weakness of the secondary
market as a result of including the prevalent issuance model, which restricted efforts in Brazil and private placement in India that
allowed privileged investors to load up on these securities. Another limitation factor is due to the public debt market of both
countries, which appear attractive to investors.
The multiple cases in this research are distant from those described in the benchmark indices (see Tables 3 and 2). Such marks as
were obtained are even lower for companies with a history of delays, postponements or even default on payment of interest,
amortization and charges of the debt issued. Thus, it appears that the non-adoption of certain governance mechanisms, or even when
these are in place but lack transparency regarding its role and activities, establishes a limit on the ability of firms to access the
corporate debt market.
Thus, it appears that the non-adoption of certain governance mechanisms, or even when these are in place but lack transparency
about their role and activities, establishes a limit on the level of firms so that they can access the marketplace of corporate debt.
The proposed index highlights the role of corporate committees, and especially the boards of directors, as structures to mitigate
the risks related to issuances, including default. What can be seen in the cases is that none of the companies that defaulted on their
issuances had at any point installed corporate governance committees.
Therefore, the development of the private debt market as a corporate financing alternative requires the improvement of formal
regulations that encourage the liquidity of secondary markets and the adoption of higher standards of corporate governance, which is
commonly inappropriate in emerging markets (Batten and Vo, 2015). At the company level, it is essential that these governance
arrangements are adopted by companies and, in addition, have detailed performance in the market to mitigate the asymmetric
information and transaction costs incurred by the investor who wants to access this market. Thus, creating conditions for sustained
expansion of this segment as needed by emerging countries like Brazil and India, requires balancing investment needs on one hand
and limitations of funding on the other.
The main result of this study is corroborate by Pour (2017), Al-Najjar and Clark (2017), Ghouma (2017), which is good corporate
governance practices have an important role in mitigating the agency conflicts inherent in the company and therefore its advance
becomes potentially beneficial to a better environment for decision-making in companies, and all other positive consequences that
this may represent, especially debt issuances.
It could be possible for future studies to expand this analysis to other countries belonging to the group BRIC group, or other
emerging countries, while highlighting the importance of the private debt market as a driving element of economic and corporate
development of these countries (Arestis et al., 2001). It would also be wise to develop econometric reviews seeking to test hypotheses
about the determinants of corporate debt issues (Shirasu and Xu, 2007; Kale and Meneghetti, 2011) in both countries or in all the
BRIC nations, in addition to the impacts of these issuances on value and corporate performance (Dann and Mikkelson, 1984) of
selected issuers. Other indices for measuring CGS can be tested, such as made by Shan (2015).

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