Petróleo Brasileiro (PBR) — commonly abbreviated as "Petrobras" — shares fell off by over 11% after delivering a smaller-than-expected dividend to shareholders.

Yahoo Finance Senior Business Reporter Ines Ferré explains why markets were so shocked by this decision, highlighting the internal pressures Petrobras faces from its board and challenges from Brazilian President Luiz Inacio Lula da Silva and his administration.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

JULIE HYMAN: Another stock that we are watching today. It's a ticker that does not trend on Yahoo Finance very often. We're talking about Petrobras, the Brazilian oil and gas giant.

The company delivering smaller than expected dividend payout here. A lot of analysts were talking about $3 billion in cash returned to investors. And now, the special dividends are not being approved. And investors not happy about it.

JOSH LIPTON: Yeah, it sounded like there was a good Bloomberg piece on it saying the CEO abstained from the vote. And they were characterizing it as caught between the government, keeping the government happy, which she apparently wants Petrobras to boost investment. And on the other hand, obviously pressure from shareholders. That's the spot the CEO found himself in.

JULIE HYMAN: Yeah, let's bring in Ines Ferre for more on this who tracks the oil and gas industry. And it's a really interesting story. Because, on the one hand, you have privately held companies that are publicly traded around the globe that pay high dividends. And then you have this company that is sort of it seems like succumbing to government pressure and is not going to be competitive in the dividend space.

INES FERRE: That's right. This is Petrobras which is a state-owned company. It is a company which is huge in Brazil. And it's one of the really large companies when it comes to oil and gas in the world.

In fact, in Brazil, it's accountable for 73% of the production of oil and gas in Brazil. And what they did was they really shocked the markets by not handing out this extraordinary dividend that investors were expecting. And this really spooked the markets.

Because the board of directors, it was said that they voted against this. And those board of directors, the members of the board of directors have been appointed by the energy minister and also by the administration, the Lula da Silva Administration, which is a leftist administration.