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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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  • Lazzarini, Sergio G.
  • Musacchio, Aldo

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.

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Paper provided by Insper Working Paper, Insper Instituto de Ensino e Pesquisa in its series Insper Working Papers with number wpe_221.

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Date of creation: Oct 2010
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Handle: RePEc:ibm:ibmecp:wpe_221
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Cited by:

  1. Antonio Antunes & Tiago Cavalcanti & Anne Villamil, 2012. "The Effects of Credit Subsidies on Development," Centre for Growth and Business Cycle Research Discussion Paper Series 176, Economics, The Univeristy of Manchester.

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