The effect of Strategic Sale of Banks: Evidence from Indonesia
AbstractWe examine the effect 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 InfoPaper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0709.
Length: 32 pages
Date of creation: May 2007
Date of revision:
banking crisis; recapitalized banks; the sale of assets; difference- in-difference models; matching estimator;
Other versions of this item:
- Parinduri, Rasyad A. & Riyanto, Yohanes E., 2012. "The Impact of the Strategic Sale of Restructured Banks: Evidence from Indonesia," World Development, Elsevier, vol. 40(3), pages 446-457.
- Rasyad A. Parinduri & Yohanes E. Riyanto, 2007. "The effect of Strategic Sale of Banks : Evidence from Indonesia," Development Economics Working Papers 21923, East Asian Bureau of Economic Research.
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-23 (All new papers)
- NEP-BAN-2007-06-23 (Banking)
- NEP-CSE-2007-06-23 (Economics of Strategic Management)
- NEP-DEV-2007-06-23 (Development)
- NEP-EFF-2007-06-23 (Efficiency & Productivity)
- NEP-SEA-2007-06-23 (South East Asia)
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