Are Private Banks More Efficient than Public Banks? Evidence from Russia

Karas, Alexei; Schoors, Koen; Weill, Laurent

doi:10.2139/ssrn.1121709

Cited by 52 publications

(56 citation statements)

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“…In a seminal and influential paper on political economy of government banking La Porta, López-de-Silanes and Shleifer (2002) reviewed the causes and consequences of direct state ownership of banks, especially in developing countries. A number of empirical studies have been devoted to comparative efficiency and competitiveness of state-controlled banks vis-à-vis other groups of banking market participants, namely domestic private and foreignowned banks (Barth, Caprio, Levine, 2000;Bonin, Hasan, Wachtel, 2005;Fries, Neven, Seabright, Taci, 2006;Fungáčová, Poghosyan, 2009;Anzoátegui, Martínez Pería, Melecky, 2010;Fungáčová, Solanko, Weill, 2010;Karas, Schoors, Weill, 2010). We also observe a renewed interest in re-testing by recent empirical data the macroeconomic effects of government ownership of banks.…”

Section: Introductionmentioning

confidence: 69%

“…The sign of the difference is unclear, though. Karas et al (2010) found that in Russia domestic public banks are no less efficient than private ones. That surprising prediction was later validated by banking statistics: by 2010 state-controlled banks (in Central Bank of Russia definition) were ahead all other groups of domestic banks in terms of profitability (Table 3).…”

Section: ____________________________________________________________mentioning

confidence: 99%

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Government Banking in Russia: Magnitude and New Features

Andrei

2011

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We show that direct state ownership is gradually substituted by indirect ownership and control. It tends to be organized in corporate pyramids that dilute public property, take control away from government bodies, and underpin managerial opportunism. Statecontrolled banks blur the borderline between commercial banking and development banking. Dominance of public banks has a bearing on empirical studies whose results might suggest state-owned banks' greater (or lesser) efficiency or competitiveness compared to other forms of ownership. We tend to interpret such results as influenced by the choice of indicator, period of observations, sample selection, etc., in the absence of an equal playing field for all groups of players. We suggest that the government's planned retreat from the banking sector will involve non-core assets mainly, whereas control over core institutions will just become more subtle. Terms of use: Documents inKeywords: Russia, banks, government, state-owned banks, public sector JEL Classification: G21, G28, P31, P52

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Section: Introductionmentioning

confidence: 69%

Section: ____________________________________________________________mentioning

confidence: 99%

Government Banking in Russia: Magnitude and New Features

Andrei

2011

SSRN Journal

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“…Nevertheless, Kraft et al (2006) focused on the Croatian banking sector over the period 1994-2000, and also took into consideration foreign bank entry. Similarly, Karas et al (2010) used the same methods and measures to study the effect of privatization on bank efficiency; however, their results showed a negative relationship between privatization and bank efficiency. Still, it is noteworthy that this study focuses on the Russian banking sector, and uses years 2002 and 2006 as two points for comparing the effect of privatization.…”

Section: Privatization and Banking Performancementioning

confidence: 99%

State Divestitures and Bank Performance: Empirical Evidence from the Middle East and North Africa Region

Elkhayat

ElBannan

2018

Asian Economic and Financial Review

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Article History JEL Classification:G21, G34.The purpose of this study is to examine the relationship between privatization of stateowned banks and bank profitability, efficiency and risk in the MENA region using a sample of 36 privatized banks and 36 already private banks in eleven countries. With regards to the economic slowdowns and political instability in this region, the study results should be of interest to regulators, bank supervisors and policy makers studying the implications of bank reforms. Employing t-tests, country and time-fixed effects OLS regression and difference-in-differences analysis, the findings of this study conclude that banks in the MENA region have enhanced their cost efficiency and decreased their credit risk significantly after being privatized. Although, the study concludes that privatization improves bank cost efficiency and reduces risk, the effect on profitability remains inconsequential and debatable. This study proposes that bank privatization as a part of comprehensive reform programs should be supported in the MENA region to reduce the burden on state budget, and enhance managerial efficiency.Contribution/ Originality: This study uses new estimation methodology, the difference-in-differences (DID) analysis, to measure the effect of state divestitures on banking performance. Applying these exhaustive empirical methods result in: banks in the MENA region are able to meet benchmark performance by improving their cost efficiency and reducing risk of their loan losses.

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“…Whereas lending and pricing decisions of state-owned banks can deviate from rational economic practice, lending on behalf of the government need not imply inferior revenue performance of public banks in comparison with their private peers. In Russia, domestic public banks are no less efficient than the private (Karas et al, 2010). Although that finding was met with some skepticism, it was later verified by the financial details disclosed in banking statistics.…”

Section: State-controlled Banks Compared With Other Market Participantsmentioning

confidence: 99%

“…For example, an influential paper on the political economy of state banking by La Porta et al (2002) reviewed the causes and consequences of direct state ownership of banks, with a focus on developing countries. The comparative efficiency and competitiveness of state-controlled banks versus domestic private and foreign-owned entities has been the subject of a number of empirical studies (Bonin et al, 2005;Fries et al, 2006;Fungáčová et al, 2010;Karas et al, 2010;Anzoátegui et al, 2012). Efforts have been made to re-test the macroeconomic effects of government ownership of banks, using recent empirical data.…”

Section: Introductionmentioning

confidence: 99%

The Impact of State-Controlled Banks on the Russian Banking Sector

Vernikov

2012

Eurasian Geography and Economics

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This paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2011. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.JEL codes: G210, G280, H820, L800, P520.

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Are Private Banks More Efficient than Public Banks? Evidence from Russia

Cited by 52 publications

References 47 publications

Government Banking in Russia: Magnitude and New Features

Government Banking in Russia: Magnitude and New Features

State Divestitures and Bank Performance: Empirical Evidence from the Middle East and North Africa Region

The Impact of State-Controlled Banks on the Russian Banking Sector

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