State-owned enterprises, public corporate governance codes, and financial performance: evidence from Brazil

Purpose This study aims to examine the impact of Brazil’s 2016 State-Owned Enterprises Law (BLS), a comprehensive and mandatory public corporate governance code (PCGC), on the financial performance of state-owned enterprises (SOEs). It assesses whether mandatory governance reforms mitigate agency conflicts and enhance the efficiency of SOEs. Design/methodology/approach Using panel data from 2010 to 2023 on 346 publicly listed Brazilian companies, including 28 SOEs, the study uses a differences-in-differences model to estimate a robust association of the BLS implementation with SOEs’ financial performance. Return on assets is used as the primary performance measure. Findings The results show that the implementation of the BLS were associated with a significant improvement in SOEs’ financial performance. This suggests that mandatory PCGCs can strengthen governance mechanisms, reducing agency conflicts and enhancing financial sustainability in SOEs. Originality/value While previous research has focused on the diffusion and implementation of PCGCs, little empirical work has evaluated their financial impact on SOEs. This study contributes to the literature by providing empirical evidence on the effectiveness of governance reforms in improving SOE performance, offering valuable policy insights for emerging economies considering similar regulatory changes.