Choice Reviews Online · 2014 · 332 citations · 0 references
Social SciencesEconomicsPolitical ScienceAgency TheoryCorporate FinancePolitical EconomyState SovereigntyState-owned Enterprise ReformState-owned EnterprisesAgency Problems In FinancingNational ChampionsSovereign Wealth Fund FinancingSovereign Wealth FundsState Enterprise OwnershipState Ownership Of BanksState-owned Enterprise FinancingState-owned Enterprise Performance
The 1980s–90s liberalization reshaped government economic management, giving rise to new forms of state capitalism where states act as majority or minority shareholders or financial backers of private firms. The authors quantitatively assess Brazil’s 1976–2009 economic performance to determine how state‑capitalism models affect corporate investment and performance. They compare a majority‑investment model that grants SOEs financial autonomy and professional management with a hybrid model using sovereign wealth funds, holding companies, and development banks to hold minority equity and alleviate capital constraints. Both models reduce agency problems but fail to eliminate government intervention, rendering the private‑vs‑state debate irrelevant as private ownership increasingly intertwines with state capital worldwide.
The wave of liberalization that swept world markets in the 1980s and 90s altered the ways that governments manage their economies. Reinventing State Capitalism analyzes the rise of new species of state capitalism in which governments interact with private investors either as majority or minority shareholders in publicly-traded corporations or as financial backers of purely private firms (the so-called national champions). Focusing on a detailed quantitative assessment of Brazil's economic performance from 1976 to 2009, Aldo Musacchio and Sergio Lazzarini examine how these models of state capitalism influence corporate investment and performance.According to one model, the state acts as a majority investor, granting the state-owned enterprise (SOE) financial autonomy and allowing professional management. This form, the authors argue, has reduced many agency problems commonly faced by state ownership. According to another hybrid model, the state uses sovereign wealth funds, holding companies, and development banks to acquire a small share of equity ownership in a corporation, thereby potentially alleviating capital constraints and leveraging latent capabilities.Both models have benefits and costs. Yet neither model has entirely eliminated the temptation of governments to intervene in the operation of natural resource industries and other large strategic enterprises. Nevertheless, the longstanding debate over whether private ownership is superior or inferior to state capitalism has become irrelevant, Musacchio and Lazzarini conclude. Private ownership is now mingled with state capital on a global scale.