58 Pages Posted: 9 Aug 2000
Date Written: March 1, 2000
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 optimistic "development" theories of government ownership of banks common in the 1960s, but supports the more "political" theories of the effects of government ownership of firms.
Suggested Citation: Suggested Citation
La Porta, Rafael and Lopez de Silanes, Florencio and Shleifer, Andrei, Government Ownership Of Banks (March 1, 2000). Harvard Institute of Economic Research Paper No. 1890, KSG Working Paper No. 01-016. Available at SSRN: https://ssrn.com/abstract=236434 or http://dx.doi.org/10.2139/ssrn.236434