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

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  • Sergio G. Lazzarini
  • Aldo Musacchio

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.

Suggested Citation

  • Sergio G. Lazzarini & Aldo Musacchio, 2010. "Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003," Business and Economics Working Papers 095, Unidade de Negocios e Economia, Insper.
    • Handle: RePEc:aap:wpaper:095
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