The Government's Role in Government-Owned Banks

55 Pages Posted: 26 Sep 2013

See all articles by Chung-Hua Shen

Chung-Hua Shen

National Taiwan University - Department of Finance

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Chih-Yung Lin

National Chiao-Tung University

Date Written: August 15, 2013

Abstract

In this study, we reinvestigate the question of whether government banks are inferior to private banks. We use cross country data from 1993 to 2007 to trace the different types of government banks. These types comprise banks that acquire distressed banks, normal banks, or no banks at all. Contrary to common belief, the evidence shows that unless government banks are required to purchase a distressed bank because of political factors (the government’s role), their performances are at par with that of private banks. This fact particularly holds true in countries with poor records on political rights and governance.

Keywords: government banks, political factor, government role, merger, distressed bank, institutional factor

JEL Classification: C23, G21, G28, G34

Suggested Citation

Shen, Chung-Hua and Hasan, Iftekhar and Lin, Chih-Yung, The Government's Role in Government-Owned Banks (August 15, 2013). Bank of Finland Research Discussion Paper No. 15/2013. Available at SSRN: https://ssrn.com/abstract=2330782 or http://dx.doi.org/10.2139/ssrn.2330782

Chung-Hua Shen

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Iftekhar Hasan

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Chih-Yung Lin (Contact Author)

National Chiao-Tung University ( email )

Taiwan

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