Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003
Sérgio G. Lazzarini
Insper Institute of Education and Research
Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research
November 22, 2010
There is growing interest in how governments shape industries and influence firm performance. Using a database of 296 firms traded on the São Paulo stock exchange between 1995 and 2003, we find having BNDES (the Brazilian National Development Bank) as a minority owner to increase firms’ return on assets. This result is possibly due to the reduction in capital constraints provided by BNDES’ long-term equity. However, we find that the effect of BNDES’ equity is reduced when it is associated with state-owned and private-domestic pyramidal groups. Thus, our results suggest that minority stakes by a development bank can have a positive effect on performance as long as they promote long-term investments and are shielded from governmental interference and potential minority shareholder expropriation.
Number of Pages in PDF File: 28
Keywords: Development Bank, State Ownership, Industrial Policy, Firm Performance
JEL Classification: G38, H11, L33working papers series
Date posted: November 23, 2010
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