Article | Academy of Management Journal | December 2013

Leviathan as a Minority Shareholder: Firm-level Implications of State Equity Purchases

by Carlos F. K. V. Inoue, Sergio G. Lazzarini and Aldo Musacchio


In many countries, firms face institutional voids that raise the costs of doing business and thwart entrepreneurial activity. We examine a particular mechanism to address those voids: minority state ownership. Due to their minority nature, such stakes are less affected by the agency distortions commonly found in full-fledged state-owned firms. Using panel data from publicly traded firms in Brazil, where the government holds minority stakes through its development bank (BNDES), we find a positive effect of those stakes on firms' return on assets and on the capital expenditures of financially-constrained firms with investment opportunities. However, these positive effects are substantially reduced when minority stakes are allocated to business group affiliates and when local institutions develop. Therefore, we shed light on the firm-level implications of minority state ownership, a topic that has received scant attention in the strategy literature.

Keywords: State ownership; Performance; business groups; development banks; State capitalism; Performance; State Ownership; Brazil;


Inoue, Carlos F. K. V., Sergio G. Lazzarini, and Aldo Musacchio. "Leviathan as a Minority Shareholder: Firm-level Implications of State Equity Purchases." Academy of Management Journal 56, no. 6 (December 2013).