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Live large or die young: subsidized loans and firm survival in Brazil

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  • Philipp Ehrl

    (Catholic University of Brasília)

Abstract

This paper assesses whether the receipt and financing conditions of subsidized loans from the Brazilian Development Bank (BNDES) affect the survival of firms between 2003 and 2014. Firms that ever obtain one of those subsidized loans from the BNDES have more employees, affiliates, experience, among other characteristics that are positively related to survival in the market. To address the firms’ nonrandom selection into BNDES loans, I use a novel combination of duration analysis and selection model. The data show that without this correction, the exit risk reduction is overestimated by a factor of three. Notwithstanding, receiving a BNDES loan and experiencing lower interest rates, significantly reduce the exit risk. The results also indicate that the expansion of the BNDES’ credit supply overly attracted low-quality firms into the market and into BNDES loans.

Suggested Citation

  • Philipp Ehrl, 2021. "Live large or die young: subsidized loans and firm survival in Brazil," Empirical Economics, Springer, vol. 61(6), pages 3479-3503, December.
    • Handle: RePEc:spr:empeco:v:61:y:2021:i:6:d:10.1007_s00181-020-02003-1
    DOI: 10.1007/s00181-020-02003-1
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    Cited by:

    1. Marisa Reis Azevedo Botelho & Graciele Fátima Sousa & Michelle Castro Carrijo & Juliene Barbosa Ferreira & Ariana Cericatto Silva, 2022. "Survival determinants for Brazilian companies, 1996 to 2016," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 233-266, June.
    2. Alves, Pedro Jorge & Lima, Ricardo Carvalho de Andrade & Emanuel, Lucas, 2022. "Natural disasters and establishment performance: Evidence from the 2011 Rio de Janeiro Landslides," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    3. Brandão, Lucas G.L. & Ehrl, Philipp, 2022. "The impact of transmission auctions on Brazilian electric power companies," Utilities Policy, Elsevier, vol. 78(C).
    4. Francesco Columba & Tommaso Orlando & Francesco Palazzo & Fabio Parlapiano, 2022. "The features of equity capital increases by Italian corporates," Questioni di Economia e Finanza (Occasional Papers) 709, Bank of Italy, Economic Research and International Relations Area.
    5. Assmann, Daisy & Ehrl, Philipp, 2021. "Individualistic culture and entrepreneurial opportunities," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1248-1268.

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    More about this item

    Keywords

    BNDES; Firm survival; Development banks; Subsidized loans; Selection bias;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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