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  • World Development

What Do State-Owned Development Banks Do? Evidence from BNDES, 2002–09

By: Sergio G. Lazzarini, Aldo Musacchio, Rodrigo Bandeira-de-Mello and Rosilene Marcon
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Abstract

Defendants of state-owned development banks emphasize their role in reducing capital constraints and fostering productive investment; detractors point out that they may benefit politically connected capitalists or bail out inefficient firms. We study the effect of loans and equity investments of the Brazilian National Development Bank (BNDES) and find that they do not have any consistent effect on firm-level performance and investment, except for a reduction in financial expenditures due to the subsidies accompanying loans. However, BNDES does not systematically lend to underperforming firms. Our results indicate that BNDES subsidizes firms that could fund their projects with other sources of capital.

Keywords

State Capitalism; Development Banks; Industrial Policy; Banking Industry; Brazil

Citation

Lazzarini, Sergio G., Aldo Musacchio, Rodrigo Bandeira-de-Mello, and Rosilene Marcon. "What Do State-Owned Development Banks Do? Evidence from BNDES, 2002–09." World Development 66 (February 2015): 237–253.
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More from the Authors
  • Veracity Worldwide: Evaluating FCPA-Related Risks in West Africa By: Aldo Musacchio and Sophus A. Reinert
  • Los Buenos Tiempos Son Éstos: Los efectos de la incursión de la banca extranjera en México después de un siglo de crisis bancarias [These Are the Good Old Days: Foreign Entry and the Mexican Banking System] By: Stephen Haber and Aldo Musacchio
  • Governments as Owners: State-Owned Multinational Companies By: Alvaro Cuervo-Cazurra, Andrew Inkpen, Aldo Musacchio and Kannan Ramaswamy
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