Privatization and bank performance in developing countries |
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| Institution: | 1. Faculty of Commerce, Fukuoka University, 8-19-1 Nanakuma, Jonan-ku, Fukuoka 814-0180, Japan;2. Kent Business School, University of Kent, Canterbury CT2 7NZ, England;1. Department of Banking and Finance Monash University, Australia;2. Bond Business School, Bond University, Australia;1. Dipartimento di Studi Aziendali e Quantitativi, Università degli Studi di Napoli “Parthenope”, Via G. Parisi 13, 80132 Napoli, Italy;2. Dipartimento di Studi e Ricerche Aziendali, Università degli Studi di Salerno, Via Ponte don Melillo, 84084 Fisciano (SA), Italy |
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| Abstract: | We examine the postprivatization performance of 81 banks from 22 developing countries. Our results suggest that: (i) On average, banks chosen for privatization have a lower economic efficiency, and a lower solvency than banks kept under government ownership. (ii) In the postprivatization period, profitability increases but, depending on the type of owner, efficiency, risk exposure and capitalization may worsen or improve. However, (iii) Over time, privatization yields significant improvements in economic efficiency and credit risk exposure. (iv) We also find that newly privatized banks that are controlled by local industrial groups become more exposed to credit risk and interest rate risk after privatization. |
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