Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305456 
Year of Publication: 
2024
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1590
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
State-owned enterprises (SOEs) are often justified for correcting market failures, providing essential public services, and fulfilling social objectives. Yet, SOEs face unique governance challenges as agency conflicts usually increase with state ownership. This paper examines Brazil's efforts to address agency conflicts in SOEs, including new legislation (Law 13303 of 2016, the "Law on SOEs") establishing stringent criteria for the appointment of executives and for the accountability and a complementary monitoring mechanism known as IG-SEST. Using the difference-in-differences methodology, we assess the impact of those interventions on SOEs profitability and labor productivity. Although no significant effect of the more-stringent governance requirements of the Law on SOEs was detected, the group of federal SOEs, which adopted the IG-SEST monitoring mechanism, significantly increased their profitability compared to similar municipal and state SOEs. Because IG-SEST anchored its indicators in corporate governance parameters specified in the Law on SOEs, this result can be interpreted as potential evidence that institutional changes might require complementary mechanisms for effective implementation. These findings are consistent with previous work suggesting that corporate governance might require broader institutional reforms, including fiscal policies to mitigate government action with a negative effect on the performance and solvency of SOEs.
Subjects: 
state-owned enterprises
state ownership
state capitalism
corporate governance
corporate governance reform
JEL: 
G34
H11
H83
L32
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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