Government subsidies and insolvency risk in Brazilian financial institutions
DOI:
https://doi.org/10.11606/issn.1982-6486.rco.2025.232628Keywords:
Government subsidies, Bankruptcy risk, Financial systemAbstract
This study investigates the relationship between the receipt of government subsidies and the insolvency risk of publicly listed Brazilian financial institutions. By applying regression analysis using GMM System estimators for a sample of 47 companies between 2010 and 2020, the findings reveal that government subsidies are related to a lower measured insolvency risk. However, the results differ when the sample is divided into banking and non-banking institutions. This study contributes to the literature, given the limited research on insolvency risk in the Brazilian financial sector. This evidence broadens the understanding of the effectiveness of such subsidies as a public policy tool, suggesting that receiving government subsidies may represent a source of resources capable of creating economic conditions that lead to a lower risk of insolvency in financial institutions.
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