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The effect of Strategic Sale of Banks: Evidence from Indonesia

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  • Rasyad A. Parinduri

    ()

    (Singapore Center for Applied and Policy Economics (SCAPE) Department of Economics, National University of Singapore)

  • Yohanes E. Riyanto

    ()

    (Department of Economics, National University of Singapore)

Abstract

We 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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File URL: http://www.fas.nus.edu.sg/ecs/pub/wp-scape/0709.pdf
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Paper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0709.

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Length: 32 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:sca:scaewp:0709
Contact details of provider: Web page: http://www.fas.nus.edu.sg/ecs/scape/index.html
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Keywords: banking crisis; recapitalized banks; the sale of assets; difference- in-difference models; matching estimator;

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Find related papers by JEL classification:
  • 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

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Cited by:

  1. Rasyad A. Parinduri & Yohanes E. Riyanto, 2014. "Bank Ownership and Efficiency in the Aftermath of Financial Crises: Evidence from Indonesia," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 93-106, 02.
  2. Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2013. "The influence of political factors on commercial banks in Central European countries," Journal of Financial Stability, Elsevier, vol. 9(4), pages 759-777.

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