Home/Working Papers/Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003
Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003
Código: WPE – 227
Sergio G. Lazzarini
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.