Do privatized banks in middle- and low-income countries perform better than rival banks? An intra-industry analysis of bank privatization

Privatization and bank performance in developing countries

“…Overall, our results are consistent with a contemporaneous study by Otchere (2005) who shows, for a sample of 18 banks, that privatization yields marginal improvements in the postprivatization operating performance. Altogether, the results of both studies suggest that continued government ownership may drive these findings.…”

From state to private ownership: Issues from strategic industries

“…However, their sample is largely dominated by OECD countries. In developing countries, and Otchere (2005) also report modest improvements in the postprivatization profitability, risk exposure, and economic efficiency of the privatized banks, due mostly to continued government ownership and low involvement of foreign investors. In the particular case of Argentina, Berger et al (2005) find that state-owned banks and foreign-owned banks have poor long-term performance relative to domestically-owned banks.…”

How Have Consumers Fared in Bank Privatization? International Evidence

“…They found that state-owned banks are significantly less profitable than privately-owned banks. Otchere (2005) also found that privatized banks underperform in the long run. However, he documented marginal improvements in post-privatization operating performance of privatized banks.…”

“…Governments have found the solution to the performance problems and financial woes of state enterprises in privatization. (Note 2) There is evidence that in developed countries, bank privatization improves performance (Otchere and Chan (2003) and Otchere (2009) Otchere (2005) finds marginal improvements in the performance of privatized banks in middle-and low-income countries. Megginson (2005) reviewed studies on bank privatization and found that state-owned banks are less efficient than privately owned banks, and that state domination of banking imposes increasingly severe penalties on those countries with the largest state banking sectors.…”