Government Ownership of Banks
Rafael La Porta
Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)
Florencio Lopez de Silanes
EDHEC Business School; National Bureau of Economic Research (NBER); Tinbergen Institute
Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
NBER Working Paper No. w7620
In this paper, we investigate a neglected aspect of financial systems of many countries around the world: government ownership of banks. We assemble data which establish four findings. First, government ownership of banks is large and pervasive around the world. Second, such ownership is particularly significant in countries with low levels of per capita income, underdeveloped financial systems, interventionist and inefficient governments, and poor protection of property rights. Third, government ownership of banks is associated with slower subsequent financial development. Finally, government ownership of banks is associated with lower subsequent growth of per capita income, and in particular with lower growth of productivity rather than slower factor accumulation. This evidence is inconsistent with the optimistic development' theories of government ownership of banks common in the 1960s, but supports the more recent political' theories of the effects of government ownership of firms.
Number of Pages in PDF File: 57working papers series
Date posted: May 16, 2000
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