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Nonfinancial companies as large shareholders alleviate financial constraints of Brazilian firm

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  • Crisóstomo, Vicente Lima
  • López-Iturriaga, Félix Javier
  • Vallelado González, Eleuterio

Abstract

We analyze whether financial constraints of Brazilian firms are alleviated by ownership structure. More specifically, we study whether the presence of nonfinancial firms as shareholders of Brazilian firm mitigates financial constraints. We find that the presence of nonfinancial firms as significant shareholders reduces financial constraints, probably because such blockholders are able to reduce asymmetric information problems that are at the origin of financial constraints. This result indicates that the changes in the corporate ownership of the Brazilian firms, achieved within the country's structural changes, have been positive for firm investment and have contributed to the development of Brazil.

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  • Crisóstomo, Vicente Lima & López-Iturriaga, Félix Javier & Vallelado González, Eleuterio, 2014. "Nonfinancial companies as large shareholders alleviate financial constraints of Brazilian firm," Emerging Markets Review, Elsevier, vol. 18(C), pages 62-77.
  • Handle: RePEc:eee:ememar:v:18:y:2014:i:c:p:62-77
    DOI: 10.1016/j.ememar.2014.01.005
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    Keywords

    Investment; Financial constraints; Ownership structure; Ownership in hands of nonfinancial firms; Brazil;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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