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Do companies that benefit from development banks' funding invest more? New evidence from Brazil

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  • Gomes, Matheus da Costa
  • Valle, Mauricio Ribeiro do

Abstract

This study analyzes the effects of funding from the Brazilian Development Bank (BNDES) on corporate investments considering beneficiary companies' social engagement. Previous studies have examined these effects only from an industrial perspective, where increased investment is mandatory, neglecting social initiatives. We explore a sample of 2515 companies between 2002 and 2019 through a panel event study with two-way fixed effects. We estimate models using a control group and subsamples of beneficiary companies based on a social variable that indicates more/less social engagement. The evidence shows that the BNDES's impact on investments after treatment is heterogeneous: socially engaged companies (usually utility companies) did not increase investments, while companies without social engagement (companies undergoing growth and transformation) invested more. Thus, the criticism that the BNDES does not impact investment can be wrong if examined without considering the social perspective. These findings mainly guide policymakers in formulating and evaluating public policies guided by state-owned development banks.

Suggested Citation

  • Gomes, Matheus da Costa & Valle, Mauricio Ribeiro do, 2023. "Do companies that benefit from development banks' funding invest more? New evidence from Brazil," Economic Modelling, Elsevier, vol. 127(C).
    • Handle: RePEc:eee:ecmode:v:127:y:2023:i:c:s0264999323002882
    DOI: 10.1016/j.econmod.2023.106476
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    More about this item

    Keywords

    Investment; Financing; Externality; Social; BNDES;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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