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In Strange Company: The Puzzle of Private Investment in State-Controlled Firms

39 Pages Posted: 14 Feb 2013  

Mariana Pargendler

Fundação Getulio Vargas Law School at São Paulo; New York University School of Law

Aldo Musacchio

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

Sérgio G. Lazzarini

Insper Institute of Education and Research

Date Written: February 14, 2013

Abstract

A large legal and economic literature describes how state-owned enterprises (SOEs) suffer from a variety of agency and political problems. Less theory and evidence, however, have been generated about the reasons why state-owned enterprises listed in stock markets manage to attract investors to buy their shares (and bonds). In this Article, we examine this apparent puzzle and develop a theory of how legal and extralegal constraints allow mixed enterprises to solve some of these problems. We then use three detailed case studies of state-owned oil companies – Brazil’s Petrobras, Norway’s Statoil, and Mexico’s Pemex – to examine how our theory fares in practice. Overall, we show how mixed enterprises have made progress to solve some of their agency problems, even as government intervention persists as the biggest threat to private minority shareholders in these firms.

Suggested Citation

Pargendler, Mariana and Musacchio, Aldo and Lazzarini, Sérgio G., In Strange Company: The Puzzle of Private Investment in State-Controlled Firms (February 14, 2013). Harvard Business School BGIE Unit Working Paper No. 13-071. Available at SSRN: https://ssrn.com/abstract=2217627 or http://dx.doi.org/10.2139/ssrn.2217627

Mariana Pargendler

Fundação Getulio Vargas Law School at São Paulo ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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

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

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