Bank Privatization in MENA and OECD Countries and the Role of Economic, Political and Institutional Factors

Anis Ochi,Samir Maktouf,Makram Nouaili

doi:10.5539/ibr.v8n4p291

Anis Ochi, Samir Maktouf + Show 1 more

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https://doi.org/10.5539/ibr.v8n4p291

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Abstract

We investigate how political, economic and institutional factors are related to a country’s decision to privatize state-owned banks. Using a panel of 38 OECD and MENA countries from 1988 to 2011, we find that political and institutional factors significantly affect the likelihood of bank privatization only in developing countries. Specifically, in MENA countries, bank privatization is more likely the more accountable the government is to its people. In contrast, none of our political variables affects the bank privatization decision in OECD countries except the ideological orientation of government. Economic factors (such as the quality of the nation’s banking sector) are significant determinants of bank privatization in both MENA and OECD nations.

Highlights

The state considers the banking system as a vital sector that plays an important role in the functioning of the economy
Our data indicate that the budget deficit (BD) and the debt crisis (DC) are important factors in a government's decision of OECD countries to privatize a state-owned bank
This paper examines how political, institutional, and economic factors are related to a country‟s decision to privatize state-owned banks, and the various factors that affect whether and when governments decide to privatize a public bank

Summary

Introduction

The state considers the banking system as a vital sector that plays an important role in the functioning of the economy. Public banks often provide to government policy tools and important instruments for implement its programs. The privatization of the banking sector is often seen as a sensitive issue. From the 1980s, privatization has inspired a vast empirical literature and became a field search implemented. Several previous studies suggest that privatization increases government revenues, contribute to development of the capital market and generally improves the efficiency of the bank because the problems of corporate governance may be more severe for public companies. Few studies have examined the factors that influence privatization decisions and have focused on the determinants of this phenomenon

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