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Corporate governance and bank performance : a joint analysis of the static, selection, and dynamic effects of domestic, foreign, and state ownership

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  • Berger, Allen N.
  • Clarke, George R. G.
  • Cull, Robert
  • Klapper, Leora
  • Udell, Gregory F.

Abstract

The authors jointly analyze the static, selection, and dynamic effects of domestic, foreign, and state ownership on bank performance. They argue that it is important to include indicators of all the relevant governance effects in the same model."Nonrobustness"checks (which purposely exclude some indicators) support this argument. Using data from Argentina in the 1990s, their strongest and most robust results concern state ownership. State-owned banks have poor long-term performance (static effect), those undergoing privatization had particularly poor performance beforehand (selection effect), and these banks dramatically improved following privatization (dynamic effect. However, much of the measured improvement is likely due to placing nonperforming loans into residual entities, leaving"good"privatized banks.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3632.

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Date of creation: 01 Jun 2005
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Handle: RePEc:wbk:wbrwps:3632

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Keywords: Financial Crisis Management&Restructuring; Banks&Banking Reform; Municipal Financial Management; Financial Intermediation; National Governance;

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