Post-Privatization State Ownership and Bank Risk-Taking: Cross-Country Evidence

64 Pages Posted: 6 Mar 2019

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Mahmud Hossain

University of Memphis - Fogelman College of Business and Economics

Date Written: February 17, 2019

Abstract

We examine the relation between state residual ownership and bank risk-taking for privatized banks from 45 countries. Applying propensity score matching, we find that privatized banks exhibit higher risk-taking after privatization than their publicly listed counterparts. When we focus on the sample of privatized banks, we find that partially privatized banks show greater risk-taking than fully privatized banks. We also observe a positive and significant relation between residual state ownership and risk-taking. These findings are consistent with the distorted objectives associated with government control. This distortion can be mitigated by the quality of a country’s institutional and regulatory environments. Finally, our results show that the effect of state ownership on risk-taking is more pronounced in countries with a higher dominance of state-owned enterprises, and during the global financial crisis.

Keywords: privatization; state ownership; risk-taking; institutions; regulations

JEL Classification: G32, G21; L22

Suggested Citation

Boubakri, Narjess and El Ghoul, Sadok and Guedhami, Omrane and Hossain, Mahmud, Post-Privatization State Ownership and Bank Risk-Taking: Cross-Country Evidence (February 17, 2019). Available at SSRN: https://ssrn.com/abstract=3336023 or http://dx.doi.org/10.2139/ssrn.3336023

Narjess Boubakri

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Mahmud Hossain

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
32
Abstract Views
225
PlumX Metrics