The effects of privatization on the capital structure of Brazilian firms

This article investigates the effects of privatization under Brazil's National Privatization Program (PND) during the 1990s on companies' capital structure. Our model suggests that privatized firms increased their market leverage by 10--14% on average relative to the level before privatization. The effect of privatization on book leverage level was 8--12% on average. These results indicate a positive effect of the privatization process on the levels of leverage of privatized firms, as predicted by signalling and agency theories.