Governing Leviathan: Assessing the Effect of Reforms to Improve the Governance of State-Owned Enterprises

• Grant number: 23/02597-6
• Support Opportunities: Scholarships in Brazil - Doctorate (Direct)
• Start date: September 01, 2024
• End date: December 31, 2025
• Field of knowledge: Applied Social Sciences - Economics
• Principal Investigator: Sérgio Giovanetti Lazzarini
• Grantee: Daphne Quintella Coelho Dutra
• Host Institution: Instituto de Ensino e Pesquisa (Insper). São Paulo , SP, Brazil

Abstract

Given the prevalence of state-owned enterprises (SOEs) throughout the world, there has been an ongoing debate on how to improve their corporate governance to mitigate the agency conflicts that usually emanate from state ownership. Although a possibility to address those problems is to change ownership from state to private control, in many contexts there is strong opposition against privatization programs and an alternative route is to pursue improvements in corporate governance practices in SOEs. Furthermore, while there is a wealth of studies examining the effect of privatization programs, there is still scant understanding of the policies and practices that could be implemented to reform the governance of SOEs and also very few robust evaluations of governance improvements on SOEs' results, especially in top-tier journals. Hence, we intend to study the case of Brazil, which implemented a host of measures to promote those practices, including new legislation ("Law on SOEs") establishing criteria for the appointment of executives and for the monitoring of SOEs, as well as a panel of governance-related metrics to track SOEs at the federal level ("IG-SEST"). The analysis will be constructed on a quantitative basis and further triangulated by a qualitative assessment. First, we will use the differences-in-differences methodology to examine the impact of those complementary interventions on the profitability (ROA and net margin) and labor productivity of SOEs, controlling for firm-level observables and fixed effects for the period 2011-2020. Second, we will run synthetic control estimations which will allow us to create comparable cases not affected by the interventions and following similar pre-trends. Finally, we will conduct semi-structured, in-depth interviews with key parties involved in the implementation of governance improvements in SOEs to examine such changes in context and to broaden our understanding of how such institutional changes may have affected SOEs. This research will contribute to theory by enriching the set of empirical studies regarding governance improvements and SOEs, whereas it will also contribute to practice, as SOEs firms are rife with agency conflicts.