The impact of financial globalization in the Brazilian financial system through institutional lenses

Informações

Código: EOR1626
Divisão: EOR - Estudos Organizacionais
Tema de Interesse: Tema 01 - Abordagem Institucional nos Estudos Organizacionais

Autores

Miriam Pires Eustachio de Medeiros Vale, Gustavo Andrey de Almeida Lopes Fernandes

Resumo

From the 1991’s economic crisis to investment grade status in 2008, the Brazilianeconomic underwent an institutional revolution. The purpose of this article is to use theinstitutional framework to discuss the transformation process that made Brazil one of the mostattractive countries in the world. This process also involved changes in people’s views whonow consider along with credit rating agencies that Brazil is a safe place to invest. With thispurpose, the paper is divided in the following sections: the first one is a brief introductionabout the institutional evolution of Brazilian financial markets in historical perspective,detailing that the key points that led Brazil to the investment grade status and so, at leasttheoretically, to attract more investments since then; the second part discusses briefly thetheory underlying financial globalization and also give some evidence that the phenomenontook place in Brazil; the third part explains the trend of financial globalization using theinstitutional literature; the next section is used to explicit the research hypotheses that aretested empirically with Brazilian data; in the penultimate part the empirical results arepresented while the last one is dedicated to conclusions relating empirical results andinstitutional theory with financial globalization in Brazil. The theoretical references arecomposed basically by traditional authors of institutional logics as Meyer and Rowan (1977)and DiMaggio and Powell (1983) mixed with sociological literature as Machado-da-Silva,Fonseca and Crubellate (2005) presented in their paper. Giddens (1986; 1991) offers thesociological terms as reciprocity, recursivity. In this sense, this literature is related to financialsystems when investors pursuing intentionality, ability and power, represented by capital,decide to invest in institutions which use this capital as a mean to change or simple reproducesocial and economic reality. The output given by these institutions is used in future investors’decision. Legitimacy is created in the interdependency between institutions and investorsthrough investing and trusting more in the country. The empirical analysis uses data from theBrazilian Central Bank to investigate the factors which explain the inflows of Foreign DirectInvestment (FDI) as long term capital and the real value of listed companies in the BrazilianStock Exchange to measure the inflows of speculative capital. Our estimates are obtainedusing ordinary-least squares, following Greene (2003), using robust estimation. The resultspoint out that not only the investment grade announcement by credit rate agencies wasimportant in the institutionalization process of Brazilian financial system, but also politicaland economic stabilization. Besides, investors do have the ability to follow and anticipatesome events in financial markets foreseeing successful options to invest. The conclusion isthat institutional logics must be used with its keys concepts to research further about financialsystems and institutionalization and legitimacy can be achieved through many paths. Theparadigms in financial systems are changing in a long process.

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