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The effect of Strategic Sale of Banks : Evidence from Indonesia

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  • Rasyad A. Parinduri

    (NUS)

  • Yohanes E. Riyanto

Abstract

We examine the eect of strategic sale the sale of banks to strategic foreign investors on banks performance. The Government of Indonesia implemented such a policy as a part of bank restructuring in the aftermath of the 1998 banking crisis. Using difference-in-difference models, we find that strategic sale leads to 12%-15% cost reduction. These results are robust to the use of other estimators such as difference-in-difference matching-estimators and stochastic-frontier analysis, to that of other performance measures such as return on assets and net interest margin, and also to that of different types of samples. These suggest that strategic sale could play an important role in restructuring troubled banks in developing countries.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 21923.

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Date of creation: May 2007
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Handle: RePEc:eab:develo:21923

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Keywords: banking crisis; recapitalized banks; the sale of assets;

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