IDEAS home Printed from https://ideas.repec.org/p/idb/brikps/1544.html
   My bibliography  Save this paper

Bank Ownership and Performance

Author

Listed:
  • Micco, Alejandro
  • Panizza, Ugo
  • Yañez, Mónica

Abstract

This paper builds a new dataset on bank ownership and bank performance covering approximately 50,000 observations for 119 countries over the 1995-2002 period. The paper then uses the dataset to reassess the relationship between bank ownership and bank performance, providing separated estimations for developing and industrial countries. It is found that, while ownership is strongly correlated with performance in developing countries, that ownership is not correlated with performance in industrial countries. In particular, the paper suggests that state-owned banks operating 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 (which tend to be characterized by higher profitability and lower costs). We also find that, in developing countries, the entry of foreign banks plays a useful role by making domestic banks more efficient in terms of overhead cost and spreads, although we do not find any effect on profitability of domestic banks.

Suggested Citation

  • Micco, Alejandro & Panizza, Ugo & Yañez, Mónica, 2011. "Bank Ownership and Performance," IDB Publications (Working Papers) 1544, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:1544
    as

    Download full text from publisher

    File URL: https://publications.iadb.org/publications/english/document/Bank-Ownership-and-Performance.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," The World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
    2. Laeven,Luc A., 1999. "Risk and efficiency in East Asian banks," Policy Research Working Paper Series 2255, The World Bank.
    3. James R. Barth & Gerard Caprio Jr. & Ross Levine, 2002. "Financial Regulation and Performance: Cross-COuntry Evidence," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 4, pages 113-142, Central Bank of Chile.
    4. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    5. repec:hrv:faseco:30747188 is not listed on IDEAS
    6. Allen N. Berger & Seth D. Bonime & Lawrence G. Goldberg & Lawrence J. White, 2004. "The Dynamics of Market Entry: The Effects of Mergers and Acquisitions on Entry in the Banking Industry," The Journal of Business, University of Chicago Press, vol. 77(4), pages 797-834, October.
    7. Altunbas, Yener & Evans, Lynne & Molyneux, Philip, 2001. "Bank Ownership and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 926-954, November.
    8. 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.
    9. Jennifer S. Crystal & B. Gerard Dages & Linda S. Goldberg, 2001. "Does foreign ownership contribute to sounder banks in emerging markets? the Latin American experience," Staff Reports 137, Federal Reserve Bank of New York.
    10. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005. "Bank performance, efficiency and ownership in transition countries," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 31-53, January.
    11. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 1999. "Globalization of financial institutions: evidence from cross-border banking performance," Working Paper Series WP-99-25, Federal Reserve Bank of Chicago.
    12. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    13. Bikker, Jacob A. & Haaf, Katharina, 2002. "Competition, concentration and their relationship: An empirical analysis of the banking industry," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2191-2214, November.
    14. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
    15. Eduardo Levy Yeyati & Alejandro Micco & Ugo Panizza, 2004. "Should the Government Be in the Banking Business? The Role of State-Owned and Development Banks," Research Department Publications 4379, Inter-American Development Bank, Research Department.
    16. 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.
    17. Claessens, Stijn & Glaessner, Tom, 1998. "The internationalization of financial services in Asia," Policy Research Working Paper Series 1911, The World Bank.
    18. Mr. Adolfo Barajas & Mr. Roberto Steiner & Ms. Natalia Salazar, 1999. "Foreign Investment in Colombia’s Financial Sector," IMF Working Papers 1999/150, International Monetary Fund.
    19. 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.
    20. DeYoung, Robert & Nolle, Daniel E, 1996. "Foreign-Owned Banks in the United States: Earning Market Share or Buying It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 622-636, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alejandro Micco & Ugo Panizza & Mónica Yañez, 2004. "Propiedad y desempeño de la banca," Research Department Publications 4382, Inter-American Development Bank, Research Department.
    2. Micco, Alejandro & Panizza, Ugo & Yanez, Monica, 2007. "Bank ownership and performance. Does politics matter?," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 219-241, January.
    3. Burcu Aydin, 2008. "Banking Structure and Credit Growth in Central and Eastern European Countries," IMF Working Papers 2008/215, International Monetary Fund.
    4. Ugo Panizza & Alejandro Micco & Mónica Yañez, 2006. "Propiedad y desempeño de la banca. ¿Importa la política?," Research Department Publications 4468, Inter-American Development Bank, Research Department.
    5. Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad, 2001. "Does foreign bank penetration reduce access to credit in developing countries"evidence from asking borrowers," Policy Research Working Paper Series 2716, The World Bank.
    6. 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," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2179-2221, August.
    7. Claessens, Stijn & van Horen, Neeltje, 2012. "Being a foreigner among domestic banks: Asset or liability?," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1276-1290.
    8. Ricardo Correa, 2009. "Cross-Border Bank Acquisitions: Is there a Performance Effect?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(2), pages 169-197, December.
    9. Nada Kobeissi, 2004. "Ownership Structure and Bank Performance: Evidence from the Middle East and North Africa," Working Papers 0413, Economic Research Forum, revised 06 Mar 2004.
    10. Detragiache, Enrica & Gupta, Poonam, 2006. "Foreign banks in emerging market crises: Evidence from Malaysia," Journal of Financial Stability, Elsevier, vol. 2(3), pages 217-242, October.
    11. Claessens, Stijn & van Horen, Neeltje, 2012. "Being a foreigner among domestic banks: Asset or liability?," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1276-1290.
    12. Kyriaki Kosmidou & Fotios Pasiouras & Angelos Tsaklanganos, 2005. "Factors influencing the profits and size of Greek banks operating abroad: a pooled time-series study," Applied Financial Economics, Taylor & Francis Journals, vol. 15(10), pages 731-738.
    13. Catarina Figueira & Joseph Nellis & David Parker, 2009. "The effects of ownership on bank efficiency in Latin America," Applied Economics, Taylor & Francis Journals, vol. 41(18), pages 2353-2368.
    14. Yin, Haiyan & Yang, Jiawen & Lu, Xing, 2020. "Bank globalization and efficiency: Host- and home-country effects," Research in International Business and Finance, Elsevier, vol. 54(C).
    15. Nguyen, My & Perera, Shrimal & Skully, Michael, 2016. "Bank market power, ownership, regional presence and revenue diversification: Evidence from Africa," Emerging Markets Review, Elsevier, vol. 27(C), pages 36-62.
    16. Adrian E. Tschoegl, 2004. "Financial Crises and the Presence of Foreign Banks," International Finance 0405016, University Library of Munich, Germany.
    17. Allen Berger & Iftekhar Hasan & Leora Klapper, 2004. "Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 169-202, April.
    18. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005. "Privatization matters: Bank efficiency in transition countries," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2155-2178, August.
    19. Dumitriu, Ramona & Stefanescu, Razvan & Nistor, Costel, 2012. "State - owned banks from Romania," MPRA Paper 52768, University Library of Munich, Germany, revised Jan 2013.
    20. Meriem Haouat & Diego N. Moccero & Ramiro Sosa Navarro, 2012. "Foreign Banks and Credit Volatility: The Case of Latin American Countries," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 1017-1033, November.

    More about this item

    Keywords

    WP-518;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idb:brikps:1544. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/iadbbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Felipe Herrera Library (email available below). General contact details of provider: https://edirc.repec.org/data/iadbbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.