The Impact of State Ownership on Performance Differences in Privately-Owned Versus State-Owned Banks: An International Comparison

Efficiency and market power in Latin American banking

“…State-ownership has resulted in less efficient banks (Megginson, 2005) and poorly developed banks (Barth et al, 2001). This underperformance is correlated with the level of government involvement and the perverse incentives of political bureaucrats (Cornett et al, 2010). The evidence on the relative efficiency of foreign and local banks is subjective (Berger et al, 2000) with no clear conclusion.…”

“…In the early 1990s, state-owned banks held 45 and 50% of banking sector assets in Argentina and Brazil (Carvalho et al, 2009), and 100% in Mexico following the 1982 bank nationalisation (Haber, 2005). Agency problems can explain performance differences between state-owned and privately owned banks (Megginson, 2005) and the former are characterised by low levels of profitability and capitalization, poor credit control, and inefficient control of costs (Cornett et al, 2010). According to Ness (2000) public ownership created moral hazards between the government's economic and political goals and bank's business goals, and the relatively large size of public banks conferred a too-big-to-fail status that required frequent use of public funds to support ailing institutions, which justified the bank privatisation process.…”

Income diversification and risk: Does ownership matter? An empirical examination of Indian banks

“…Altunbas et al, 2001;La Porta et al, 2002;Barth et al, 2004;Beck et al, 2004). More recently, Cornett et al (2010) examine the performance of banks over the 1980-2004 period to find that the deterioration in the cash flow returns, core capital, and credit quality of state-owned banks was significantly greater than that of privatelyowned banks for the period 1997-2000 which was the 4-year period after the beginning of the Asian financial crisis. However, they find that state-owned banks were able to close this gap in the postcrisis period of 2001-2004.…”

The impact of management and board ownership on profitability in banks with different strategies

“…Previous studies on bank ownership focus on the performance impact 0378-4266/$ -see front matter Ó 2011 Elsevier B.V. All rights reserved. doi:10.1016/j.jbankfin.2011.05.013 of organisational form (Altunbas et al, 2001;Iannotta et al, 2007), state ownership (La Porta et al, 2002;Berger et al, 2005;Micco et al, 2007;Jia, 2009;Cornett et al, 2010), foreign ownership (Berger et al, 2005;Lensink et al, 2008), blockholder ownership (Caprio et al, 2007;Laeven and Levine, 2009;Shehzad et al, 2010) and whether the bank is listed or not (Iannotta et al, 2007;Barry et al, 2011). is the first study to examine the impact of the level of management and board ownership on bank efficiency.…”