Subnational government banks profitability in Brazil between 2003 and 2019

Abstract

The role of public banks in the economy has been extensively discussed in the literature.
Within this debate, one of the primary criticisms of these financial institutions is
their lower profitability compared to private peers. In Brazil, the subnational commercial
government-owned banks remain one of the least studied bank categories, particularly following
the financial crises they encountered in the 1980/90s. This article aims to empirically
investigate the effect of the subnational government-owned control on banks’ performance
in a more recent timeframe. Contrary to the conventional literature, the results provide evidence
that this control positively impacts profitability.

JEL Classification: G21; G32; L30.