Bank ownership and firm-level performance: an empirical assessment of state-owned development banks

Development banks - also referred to as development financial institutions, state investment banks, promotional banks - are public sector or government-invested legal entities with an explicit policy mandate to promote the socio-economic goals in a region, sector or specific market segment. They are typically very large state-owned financial institution, and are relevant players both in developed and developing countries. In term of size, for example, the German KfW has an asset-to-GDP ratio higher than 15%; for the Brasilian BNDES the same ratio is closed to 14% (Musacchio et al. 2016). They are also growing in size: data from Orbis Bank Focus (Bureau Van Djik) report that the total asset managed by European development banks in 2014 was 2,630 billions Euro, three times higher than the total asset in 2005 (866 billions euro). In the same period, their aggregate loan portfolio was more than 1,000 billions Euro, 65% higher than 2008 (616 billions Euros) when development banks start playing a relevant countercyclical role during the Great Recession by increasing the supply of credit or equity investment to the private sector while private banks experienced temporary difficulties.