Does State Ownership of Banks Matter? Russian Evidence from the Financial Crisis
Journal of Emerging Market Finance Vol 17 (2), pp.1-38
40 Pages Posted: 1 Oct 2014 Last revised: 25 Aug 2018
Date Written: March 22, 2016
This paper examines the effects of state ownership and government interventions on lending behavior and capitalization of banks over the period 2005-2011. Using data from the highly state-influenced Russian banking sector, it is documented that the relationship between state ownership and lending is nonlinear. While overall loan growth decreased and interest rates rose, it is found that fully state-controlled banks increased lending and charged lower interest rates during the crisis of 2008-2010. Moreover, fully state-owned and state-supported banks demonstrated counter-cyclical lending behavior during the crisis. However, while state-owned banks were better protected against asset default, there is a weak evidence to suggest that government interventions may result in increased riskiness of banks.
Keywords: bank lending, state ownership, privatization, financial crisis, government interventions
JEL Classification: G01, G21, G28, G32, O16
Suggested Citation: Suggested Citation