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Bank ownership and performance. Does politics matter?

  • Micco, Alejandro
  • Panizza, Ugo
  • Yanez, Monica

This paper uses a new dataset to reassess the relationship between bank ownership and bank performance, providing separate estimations for developing and industrial countries. It finds that state-owned banks located in developing countries tend to have lower profitability and higher costs than their private counterparts, and that the opposite is true for foreign-owned banks. The paper finds no strong correlation between ownership and performance for banks located in industrial countries. Next, in order to test whether the differential in performance between public and private banks is driven by political considerations, the paper checks whether this differential widens during election years; it finds strong support for this hypothesis.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 31 (2007)
Issue (Month): 1 (January)
Pages: 219-241

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Handle: RePEc:eee:jbfina:v:31:y:2007:i:1:p:219-241
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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  9. Barth, James R. & Caprio Jr., Gerard & Levine, Ross, 1999. "Financial regulation and performance : cross-country evidence," Policy Research Working Paper Series 2037, The World Bank.
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  16. James R. Barth & Gerard Caprio Jr. & Ross Levine, 2001. "Banking Systems around the Globe: Do Regulation and Ownership Affect Performance and Stability?," NBER Chapters, in: Prudential Supervision: What Works and What Doesn't, pages 31-96 National Bureau of Economic Research, Inc.
  17. Micco, Alejandro & Panizza, Ugo, 2006. "Bank Ownership and Lending Behavior," POLIS Working Papers 61, Institute of Public Policy and Public Choice - POLIS.
  18. Beck, Thorsten & Crivelli, Juan Miguel & Summerhill, William, 2005. "State bank transformation in Brazil - choices and consequences," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2223-2257, August.
  19. Kaushik Bhattacharya, 2003. "How good is the BankScope database? A cross-validation exercise with correction factors for market concentration measures," BIS Working Papers 133, Bank for International Settlements.
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  22. Clarke, George R. G. & Cull, Robert & D'Amato, Laura & Molinari, Andrea, 1999. "The effect of foreign entry on Argentina's domestic banking sector," Policy Research Working Paper Series 2158, The World Bank.
  23. Berger, Allen N. & Clarke, George R. G. & Cull, Robert & Klapper, Leora & Udell, Gregory F., 2005. "Corporate governance and bank performance : a joint analysis of the static, selection, and dynamic effects of domestic, foreign, and state ownership," Policy Research Working Paper Series 3632, The World Bank.
  24. Vennet, Rudi Vander, 1996. "The effect of mergers and acquisitions on the efficiency and profitability of EC credit institutions," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1531-1558, November.
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  27. Arturo Galindo & Alejandro Micco & César Manuel Serra, 2003. "Better the Devil that You Know: Evidence on Entry Costs Faced by Foreign Banks," Research Department Publications 4313, Inter-American Development Bank, Research Department.
  28. Eduardo Levy Yeyati & Alejandro Micco & Ugo Panizza, 2004. "Should the Government Be in the Banking Business?: The Role of State-Owned and Development Banks," IDB Publications (Working Papers) 6684, Inter-American Development Bank.
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