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

29 Pages Posted: 23 Jan 2011

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: January 21, 2011

Abstract

There is a growing literature comparing the performance of private vs. state-owned companies. Yet, there is little work examining the effects of having the government as a minority shareholder of private companies. We conduct such a study using data for 296 publicly-traded corporations in Brazil, looking at the effects of equity purchases by the National Bank for Economic and Social Development (BNDES) on firm performance between 1995 and 2003. Our fixed-effects regressions show that BNDES’s purchases of equity lead to increases in return on assets and investment in fixed assets. Finally, we find that the positive effect of BNDES’ equity purchases is reduced when the target firms belong to state-owned and private pyramidal groups. Therefore, our argue that having development banks owning minority stakes 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.

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 (January 21, 2011). Harvard Business School BGIE Unit Working Paper No. 11-073. Available at SSRN: https://ssrn.com/abstract=1745081 or http://dx.doi.org/10.2139/ssrn.1745081

Sérgio Giovanetti Lazzarini

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 (Contact Author)

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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