Petrobras after Lava-Jato corruption scandals: an analysis of the value of the company until 2016

Abstract

Corruption in the public and private sectors can cause economic losses for countries and companies. In Brazil, corruption has been much discussed and several cases in the public and private spheres have been observed in recent years. The Lava-Jato operation is a recent example of which is highlighted by the media and the population. In this case, the Federal Police investigate corruption and money laundering involving several public and private agents and a Petrobras company. Since the beginning of the investigation in 2014, an oil company that is one of the main companies in Brazil faces an economic, political and moral crisis. Using the discounted cash flow valuation model, in three scenarios of projection with distinct attractiveness rates, this article aims to measure the value of Petrobras after the outbreak of corruption scandals pointed out by the Lava-Jato operation. The research found that in all three equity scenarios a reduced firm value was achieved during the development period and a modest recovery in the residual period. Therefore, corruption has negatively affected the value of Petrobras.