The economic literature postulates that to the extent that an industry is concentrated it will tend to exhibit relatively higher returns on invested capital (Kupfer and Hasenclever, 2002; Tirole, 1988). Martins et al (2004) have shown that the Brazilian interstate passenger transportation (BIPT) industry is highly concentrated, albeit such industry is government regulated. Certainly, as a price taker, firms in the BIPT industry are making horizontal mergers in order to reduce common costs and so to boost profit. This research paper investigates if the BIPT industry concentrating strategy is leading to a higher return on invested capital. The investigation will be done through the OLS method (Gujarati, 1995; Maddala, 1992). If at all possible, the investigation should be run with time series data. Rather, we estimate a cross-section equation because data availability. As far as the concentration measure is concerned, we take the one most employed in the literature, i.e. (Kupfer and Hasenclever, 2002; Tirole, 1988) based on the number of passengers transported by kilometer by firm. As firms’ financial statements are not available, we consider as a proxy for return on investments the rate of growth of the amount of buses each firm has. Accordingly to economic literature, as abovementioned, it is expected that is statistically greater than zero. There is data availability for 2001, 2002 and 2003 years. The number of firms in the BIPT industry (N=214) is the same in each year mentioned. The sources of variables are the National Inland Transport Regulatory Agency (ANTT). We have regressed equation [3] for two sample sets. The first one, takes N=214. The second one, takes N=185, because there are in such industry 17 holdings compounding by 46 firms, as a whole. From the regression results we can not reject that the concentration in BIPT industry improves investment returns at the 5 percent level of significance. We have also run equation [3] for the 2003 data set and the results were similar to 2002 ones – supported by the F test of structural stability. So, we may say the results are robust. One further point deserves mention. Econometrically speaking, the results have improved when we regressed equation [3] with N=185, i.e., when we put together firms which belong to a holding. In conclusion, it might be said that the concentration benefits in the interstate passenger transportation are not being directly conveyed to society, since the price of ticket has not fallen
