Bank Ownership and Performance

IADB Working Paper No. 518

Posted: 10 Dec 2004

See all articles by Alejandro Micco

Alejandro Micco

University of Chile

Ugo Panizza

United Nations - Conference on Trade and Development (UNCTAD); Graduate Institute of International and Development Studies (IHEID)

Monica Yanez

Inter-American Development Bank (IDB) - Research Department

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Abstract

This paper builds a new dataset of bank ownership and bank performance covering approximately 50,000 observations for 119 countries over the 1995-2002 period. Next it uses the dataset to reassess the relationship between bank ownership and bank performance providing separated estimations for developing and industrial countries. It finds that ownership is strongly correlated with performance in developing countries but that ownership is not correlated with performance in industrial countries. In particular, the paper suggest that state-owned banks operating in developing countries tend to have lower profitability and higher costs than their private counterparts and that the opposite is true for foreign owned banks (which tend to be characterized by higher profitability and lower costs). We also find that, in developing countries, the entry of foreign banks play a useful role by making domestic banks more efficient in terms of overhead cost and spreads, although we do not find any effect on profitability of domestic banks.

Keywords: Banking, privatization, owership, performance

JEL Classification: G21, D21

Suggested Citation

Micco, Alejandro and Panizza, Ugo G. and Yanez, Monica, Bank Ownership and Performance. IADB Working Paper No. 518. Available at SSRN: https://ssrn.com/abstract=629381

Alejandro Micco

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Ugo G. Panizza (Contact Author)

United Nations - Conference on Trade and Development (UNCTAD) ( email )

Palais des Nations
Office E 8074
Geneva, 1211
Switzerland

Graduate Institute of International and Development Studies (IHEID) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Monica Yanez

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

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