State-controlled companies and political risk: Evidence from the 2014 Brazilian election

Augusto Carvalho and Bernardo Guimaraes
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Augusto Carvalho: Escola de Economia de São Paulo (EESP)

No 1702, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: This paper examines the vulnerability of state-controlled companies to political risk using the 2014 Brazilian election and data on stock options. In her first term as Brazilian president, Ms. Dilma Rousseff took measures that were not aligned with the objective of maximizing profits of Petrobras, the Brazilian state-controlled oil company. She was reelected president in 2014. Results show that Petrobras would be worth around 62% (USD 45 billion) more if the opposition candidate had won the election. Using our estimated reelection probabilities and stock price data, we also find that the election of Ms. Rousseff had a negative impact on the value of several companies, but the effects on Petrobras and Banco do Brasil, the state-controlled bank, were particularly strong.

Keywords: Political Risk; Election; State Intervention; Expropriation; Options (search for similar items in EconPapers)
JEL-codes: G13 H13 P16 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016-12
New Economics Papers: this item is included in nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.centreformacroeconomics.ac.uk/Discussio ... MDP2017-02-Paper.pdf (application/pdf)

Related works:
Journal Article: State-controlled companies and political risk: Evidence from the 2014 Brazilian election (2018)
Working Paper: State-controlled companies and political risk: evidence from the 2014 Brazilian election (2017)
Working Paper: State-controlled companies and political risk: evidence from the 2014 Brazilian election (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:1702

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