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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


Allen N. Berger


University of South Carolina - Moore School of Business; Wharton Financial Institutions Center; European Banking Center

George R. G. Clarke


Texas A&M International University - A.R. Sanchez Jr., School of Business

Gregory F. Udell


Indiana University - Kelley School of Business - Department of Finance

Robert Cull


World Bank - Development Research Group (DECRG)

Leora F. Klapper


World Bank; World Bank - Development Research Group (DECRG)

June 2005

World Bank Policy Research Working Paper No. 3632

Abstract:     
We jointly analyze the static, selection, and dynamic effects of domestic, foreign, and state ownership on bank performance. We 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, our 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.

Number of Pages in PDF File: 43

Keywords: Bank, governance, M&A, foreign acquisition, privatization

JEL Classification: G21, G28, G34, F36

working papers series


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Date posted: July 22, 2005  

Suggested Citation

Berger, Allen N. and Clarke, George R. G. and Udell, Gregory F. and Cull, Robert and Klapper, Leora F., Corporate Governance and Bank Performance: A Joint Analysis of the Static, Selection, and Dynamic Effects of Domestic, Foreign, and State Ownership (June 2005). World Bank Policy Research Paper No. 3632. Available at SSRN: http://ssrn.com/abstract=756948

Contact Information

Allen N. Berger
University of South Carolina - Moore School of Business ( email )
1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)
Wharton Financial Institutions Center
Philadelphia, PA 19104-6367
United States
European Banking Center
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
George Clarke (Contact Author)
Texas A&M International University - A.R. Sanchez Jr., School of Business ( email )
5201 University Blvd.
Laredo, TX 78041-1900
United States
Gregory F. Udell
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States

Robert Cull
World Bank - Development Research Group (DECRG) ( email )
1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-6365 (Phone)
202-522-1155 (Fax)
HOME PAGE: http://econ.worldbank.org/staff/rcull
Leora F. Klapper
World Bank ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)
HOME PAGE: http://econ.worldbank.org/staff/lklapper
World Bank - Development Research Group (DECRG)
1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
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