Bank privatization in Argentina : a model of political constraints and differential outcomes
AbstractBased on results from country case studies, many researchers have claimed that political constraints affect bank privatization transactions, which in turn affect the post-privatization performance of the banking sector. But no study has either econometrically tested how political constraints affect bank privatization transactions or theretically modeled the privatization transaction. The authors present a simple theoretical framework that models the inherent tradeoffs faced by governments and potential buyers in privatization transactions involving banks. The potential buyer is concerned about the probability that the bank will remain solvent, about the profits it will earn after privatization, and about the price paid for the assets and liabilities. The government is concerned about the price received for the assets, about layoffs, and about service coverage after privatization. The evidence from bank privatization transactions in Argentina in the 1990s supports several of their theoretical predictions. In particular, provinces with highfiscal deficits were willing to accept layoffs and to guarantee a larger part of the privatized banks'portfolio in return for a higher price. The tequila crisis (Mexico's economic crisis in 1994-95) meant that politicians could protect fewer jobs and had to assume a greater share of their public banks'assets. Evidence of better performance at banks privatized after Mexico's crisis suggests that, by tying politicians'hands, the crisis may have brought unforeseen benefits. This conjecture awaits further empirical validation, but the authors hope that by explicitly incorporating the incentives politicians face, analysis can begin to address the question of why some privatizations succeed more than others.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 2633.
Date of creation: 31 Jul 2001
Date of revision:
Economic Theory&Research; International Terrorism&Counterterrorism; Banks&Banking Reform; Municipal Financial Management; Financial Crisis Management&Restructuring; Banks&Banking Reform; Municipal Financial Management; Economic Theory&Research; Financial Crisis Management&Restructuring; International Terrorism&Counterterrorism;
Other versions of this item:
- Clarke, George R.G. & Cull, Robert, 2005. "Bank privatization in Argentina: A model of political constraints and differential outcomes," Journal of Development Economics, Elsevier, vol. 78(1), pages 133-155, October.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-52, June.
- Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1995.
"Privatization in the United States,"
NBER Working Papers
5113, National Bureau of Economic Research, Inc.
- Florencio Lopez-deSilanes & Andrei Shleifer & Rober Vishny, 1995. "Privatization in the United States," Harvard Institute of Economic Research Working Papers 1723, Harvard - Institute of Economic Research.
- Rafael La Porta & Florencio López-de-Silanes, 1997.
"The Benefits of Privatization : Evidence from Mexico,"
World Bank Other Operational Studies
11583, The World Bank.
- Rafael La Porta & Florencio López-De-Silanes, 1999. "The Benefits Of Privatization: Evidence From Mexico," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1193-1242, November.
- Rafael La Porta & Florencio Lopez-de-Silane, 1997. "The Benefits of Privatization: Evidence from Mexico," NBER Working Papers 6215, National Bureau of Economic Research, Inc.
- Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
- Jones, Derek C. & Mygind, Niels, 1999. "The Nature and Determinants of Ownership Changes after Privatization: Evidence from Estonia," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 422-441, September.
- Dillinger, William & Webb, Steven B., 1999. "Fiscal management in federal democracies : Argentina and Brazil," Policy Research Working Paper Series 2121, The World Bank.
- Clarke, George R. G. & Cull, Robert, 1999. "Provincial bank privatization in Argentina : the why, how, and"so what"?," Policy Research Working Paper Series 2159, The World Bank.
- Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-52, May.
- Shirley, Mary M. & L. Colin Xu, 1997.
"Information, incentives, and commitment : an empirical analysis of contracts between government and state enterprises,"
Policy Research Working Paper Series
1769, The World Bank.
- Shirley, Mary M & Xu, Lixin Colin, 1998. "Information, Incentives, and Commitment: An Empirical Analysis of Contracts between Government and State Enterprises," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(2), pages 358-78, October.
- Clarke, George R G & Cull, Robert, 2002. "Political and Economic Determinants of the Likelihood of Privatizing Argentine Public Banks," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 165-97, April.
- Wendy Carlin & Micheal Landesmann, 1998.
"From Theory into Practice? Restructuring and Dynamism in Transition Economies,"
William Davidson Institute Working Papers Series
155, William Davidson Institute at the University of Michigan.
- Carlin, Wendy & Landesmann, Michael, 1997. "From Theory into Practice? Restructuring and Dynamism in Transition Economies," Oxford Review of Economic Policy, Oxford University Press, vol. 13(2), pages 77-105, Summer.
- Jean-Jacques Laffont & Jean Tirole, 1991.
"Privatization and Incentives,"
572, Massachusetts Institute of Technology (MIT), Department of Economics.
- Clarke, George R. G. & Cull, Robert, 1999.
"Why Privatize? The Case of Argentina's Public Provincial Banks,"
Elsevier, vol. 27(5), pages 865-886, May.
- Clarke, George R. & Cull, Robert, 1998. "Why privatize? : the case of Argentina's public provincial banks," Policy Research Working Paper Series 1972, The World Bank.
- Vining, Aidan R & Boardman, Anthony E, 1992. " Ownership versus Competition: Efficiency in Public Enterprise," Public Choice, Springer, vol. 73(2), pages 205-39, March.
- Pohl, G. & Anderson, R.E. & Claessens, S. & Djankov, S., 1997. "Privatization and Restructuring in Central and Eastern Europe: Evidence and Policy Options," Papers 368, World Bank - Technical Papers.
- William Dillinger & Steven B. Webb, 1999. "Fiscal management in federal democracies: Argentina and Brazil," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(3), pages 423-483.
- Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
- Williamson, Oliver E, 1999. "Public and Private Bureaucracies: A Transaction Cost Economics Perspective," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 306-42, April.
- Kornai, Janos, 1986. "The Soft Budget Constraint," Kyklos, Wiley Blackwell, vol. 39(1), pages 3-30.
- Loren Brandt & Hongbin Li & Joanne Roberts, 2001.
"Why do Governments Privatize,"
William Davidson Institute Working Papers Series
429, William Davidson Institute at the University of Michigan.
- Claessens, Stijn & Perotti, Enrico, 2007. "Finance and inequality: Channels and evidence," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 748-773, December.
- Arghya Ghosh & Partha Sen, 2008.
"Privatization in a Small Open Economy with Imperfect Competition,"
2008-21, School of Economics, The University of New South Wales.
- Arghya Ghosh & Partha Sen, 2012. "Privatization in a Small Open Economy with Imperfect Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(3), pages 441-471, 06.
- Partha Sen & Arghya Ghosh, 2010. "Privatization In A Small Open Economy With Imperfect Competition," Working papers 195, Centre for Development Economics, Delhi School of Economics.
- Clarke, George R.G. & Cull, Robert & Fuchs, Michael, 2009.
"Bank Privatization in Sub-Saharan Africa: The Case of Uganda Commercial Bank,"
Elsevier, vol. 37(9), pages 1506-1521, September.
- Clarke, George R.G. & Cull, Robert & Fuchs, Michael, 2007. "Bank privatization in Sub-Saharan Africa : the case of Uganda commercial bank," Policy Research Working Paper Series 4407, The World Bank.
- Cull, Robert & P. Spreng, Connor, 2008.
"Pursuing Efficiency While Maintaining Outreach: Bank Privatization In Tanzania,"
Policy Research Working Paper Series
4804, The World Bank.
- Cull, Robert & Spreng, Connor P., 2011. "Pursuing efficiency while maintaining outreach: Bank privatization in Tanzania," Journal of Development Economics, Elsevier, vol. 94(2), pages 254-261, March.
- Alberto Chong & Florencio de, 2003.
"The Truth about Privatization in Latin America,"
Yale School of Management Working Papers
ysm436, Yale School of Management.
- Uwe Vollmer & Diemo Dietrich & Ralf bebenroth, 2009. "Behold the 'Behemoth'. The privatization of Japan Post Bank," Discussion Paper Series 236, Research Institute for Economics & Business Administration, Kobe University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.