Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003

28 Pages Posted: 23 Nov 2010

See all articles by Sérgio G. Lazzarini

Sérgio G. Lazzarini

Insper Institute of Education and Research

Aldo Musacchio

Brandeis University- International Business School; National Bureau of Economic Research

Date Written: November 22, 2010

Abstract

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.

Keywords: Development Bank, State Ownership, Industrial Policy, Firm Performance

JEL Classification: G38, H11, L33

Suggested Citation

Lazzarini, Sérgio Giovanetti and Musacchio, Aldo, Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003 (November 22, 2010). Available at SSRN: https://ssrn.com/abstract=1713429 or http://dx.doi.org/10.2139/ssrn.1713429

Sérgio Giovanetti Lazzarini (Contact Author)

Insper Institute of Education and Research ( email )

R Quata 300
Sao Paulo, 04542-030
Brazil
55-11-45042387 (Phone)

HOME PAGE: http://www.sergiolazzarini.insper.edu.br/indexelazza.html

Aldo Musacchio

Brandeis University- International Business School ( email )

415 South Street MC 32
Waltham, MA 02454-9110
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/aldo_musacchio

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