Bank Ownership and Performance: Does Politics Matter?

Posted: 9 Mar 2006

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

Abstract

This paper uses a new dataset to reassess the relationship between bank ownership and bank performance, providing separate estimations for developing and industrial countries. It finds that state-owned banks located 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. The paper finds no strong correlation between ownership and performance for banks located in industrial countries. Next, in order to test whether the differential in performance between public and private banks is driven by political considerations, the paper checks whether this differential widens during election years; it finds strong support for this hypothesis.

Keywords: Banking, Privatization, Ownership, Performance

JEL Classification: G21, D21

Suggested Citation

Micco, Alejandro and Panizza, Ugo G. and Yanez, Monica, Bank Ownership and Performance: Does Politics Matter?. Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=888555

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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