43 Pages Posted: 22 Jul 2005
Date Written: June 2005
We jointly analyze the static, selection, and dynamic effects of domestic, foreign, and state ownership on bank performance. We argue that it is important to include indicators of all the relevant governance effects in the same model. "Nonrobustness" checks (which purposely exclude some indicators) support this argument. Using data from Argentina in the 1990s, our strongest and most robust results concern state ownership. State-owned banks have poor long-term performance (static effect), those undergoing privatization had particularly poor performance beforehand (selection effect), and these banks dramatically improved following privatization (dynamic effect). However, much of the measured improvement is likely due to placing nonperforming loans into residual entities, leaving "good" privatized banks.
Keywords: Bank, governance, M&A, foreign acquisition, privatization
JEL Classification: G21, G28, G34, F36
Suggested Citation: Suggested Citation
Berger, Allen N. and Clarke, George R. G. and Udell, Gregory F. and Cull, Robert and Klapper, Leora F., Corporate Governance and Bank Performance: A Joint Analysis of the Static, Selection, and Dynamic Effects of Domestic, Foreign, and State Ownership (June 2005). World Bank Policy Research Paper No. 3632. Available at SSRN: https://ssrn.com/abstract=756948