Government attenuation of institutional inefficiencies in capital markets: influence on the financial performance of Brazilian electricity distribution companies

摘要

y We analyze how the government, as a shareholder or as a financier, may mitigate or aggravate institutional inefficiencies in local markets for financial capital that influence the financial performance of electricity distribution companies. On a sample of Brazilian electricity distribution firms, we assess how inefficiencies might hamper firms' performance and propose that governments may provide a market substitution effect. We further evaluate the degree to which equity participation and governmental financing moderates the influence of institutional inefficiencies in financial markets on firms' financial performance. We find that what matters is not the dichotomy of whether or not the government intervenes in financial capital markets but rather the level of equity ownership and the level of governmental financing on firms. When markets are characterized by inefficiencies, short-term financial capital may help improve firms' performance.