Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes
Based on results from country case studies, many researchers have claimed that political constraints affect bank privatization transactions, which in turn affect the post-privatization performance of the banking sector. But no study has either econ...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/07/1552019/bank-privatization-argentina-model-political-constraints-differential-outcomes http://hdl.handle.net/10986/19582 |
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okr-10986-195822021-04-23T14:03:43Z Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes Clarke, George R.G. Cull, Robert BANK ASSETS BANK DEPOSITS BANK FAILURE BANK PERFORMANCE BANK PRIVATIZATION BANKING SECTOR BANKING SERVICES BANKRUPTCY BANKS BIDDERS BUDGET CONSTRAINTS CAPITALIZATION CENTRAL BANK CITIES COMPETITION POLICY DEPOSITORS DEPOSITS ECONOMETRIC ANALYSIS ECONOMIC CONSTRAINTS EMPLOYMENT EQUILIBRIUM EXPECTED RETURN FACE VALUE FINANCIAL SECTOR FISCAL DEFICITS FOREIGN INVESTORS FORMAL ANALYSIS GOVERNMENT SUBSIDIES INFLATION INSOLVENCY INSOLVENT BANKS INTEREST INCOME INTEREST RATE INTERNATIONAL RESERVES LABOR UNIONS LAWS LENDER OF LAST RESORT LIQUIDITY MARGINAL VALUE OPERATING COSTS OPTIMIZATION POLITICAL ECONOMY PORTFOLIO PREDICTIONS PROFIT MAXIMIZATION PROVINCIAL BANKS PUBLIC ENTERPRISES RETIREMENT RETURN ON ASSETS SOFT BUDGET CONSTRAINTS SOLVENCY TIME CONSTRAINTS TRANSITION ECONOMIES UTILITY FUNCTION VOTERS Based on results from country case studies, many researchers have claimed that political constraints affect bank privatization transactions, which in turn affect the post-privatization performance of the banking sector. But no study has either econometrically tested how political constraints affect bank privatization transactions or theretically modeled the privatization transaction. The authors present a simple theoretical framework that models the inherent tradeoffs faced by governments and potential buyers in privatization transactions involving banks. The potential buyer is concerned about the probability that the bank will remain solvent, about the profits it will earn after privatization, and about the price paid for the assets and liabilities. The government is concerned about the price received for the assets, about layoffs, and about service coverage after privatization. The evidence from bank privatization transactions in Argentina in the 1990s supports several of their theoretical predictions. In particular, provinces with high fiscal deficits were willing to accept layoffs and to guarantee a larger part of the privatized banks' portfolio in return for a higher price. The tequila crisis (Mexico's economic crisis in 1994-95) meant that politicians could protect fewer jobs and had to assume a greater share of their public banks' assets. Evidence of better performance at banks privatized after Mexico's crisis suggests that, by tying politicians' hands, the crisis may have brought unforeseen benefits. This conjecture awaits further empirical validation, but the authors hope that by explicitly incorporating the incentives politicians face, analysis can begin to address the question of why some privatizations succeed more than others. 2014-08-21T19:00:43Z 2014-08-21T19:00:43Z 2001-07 http://documents.worldbank.org/curated/en/2001/07/1552019/bank-privatization-argentina-model-political-constraints-differential-outcomes http://hdl.handle.net/10986/19582 English en_US Policy Research Working Paper;No. 2633 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean ARGENTINA |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
BANK ASSETS BANK DEPOSITS BANK FAILURE BANK PERFORMANCE BANK PRIVATIZATION BANKING SECTOR BANKING SERVICES BANKRUPTCY BANKS BIDDERS BUDGET CONSTRAINTS CAPITALIZATION CENTRAL BANK CITIES COMPETITION POLICY DEPOSITORS DEPOSITS ECONOMETRIC ANALYSIS ECONOMIC CONSTRAINTS EMPLOYMENT EQUILIBRIUM EXPECTED RETURN FACE VALUE FINANCIAL SECTOR FISCAL DEFICITS FOREIGN INVESTORS FORMAL ANALYSIS GOVERNMENT SUBSIDIES INFLATION INSOLVENCY INSOLVENT BANKS INTEREST INCOME INTEREST RATE INTERNATIONAL RESERVES LABOR UNIONS LAWS LENDER OF LAST RESORT LIQUIDITY MARGINAL VALUE OPERATING COSTS OPTIMIZATION POLITICAL ECONOMY PORTFOLIO PREDICTIONS PROFIT MAXIMIZATION PROVINCIAL BANKS PUBLIC ENTERPRISES RETIREMENT RETURN ON ASSETS SOFT BUDGET CONSTRAINTS SOLVENCY TIME CONSTRAINTS TRANSITION ECONOMIES UTILITY FUNCTION VOTERS |
| spellingShingle |
BANK ASSETS BANK DEPOSITS BANK FAILURE BANK PERFORMANCE BANK PRIVATIZATION BANKING SECTOR BANKING SERVICES BANKRUPTCY BANKS BIDDERS BUDGET CONSTRAINTS CAPITALIZATION CENTRAL BANK CITIES COMPETITION POLICY DEPOSITORS DEPOSITS ECONOMETRIC ANALYSIS ECONOMIC CONSTRAINTS EMPLOYMENT EQUILIBRIUM EXPECTED RETURN FACE VALUE FINANCIAL SECTOR FISCAL DEFICITS FOREIGN INVESTORS FORMAL ANALYSIS GOVERNMENT SUBSIDIES INFLATION INSOLVENCY INSOLVENT BANKS INTEREST INCOME INTEREST RATE INTERNATIONAL RESERVES LABOR UNIONS LAWS LENDER OF LAST RESORT LIQUIDITY MARGINAL VALUE OPERATING COSTS OPTIMIZATION POLITICAL ECONOMY PORTFOLIO PREDICTIONS PROFIT MAXIMIZATION PROVINCIAL BANKS PUBLIC ENTERPRISES RETIREMENT RETURN ON ASSETS SOFT BUDGET CONSTRAINTS SOLVENCY TIME CONSTRAINTS TRANSITION ECONOMIES UTILITY FUNCTION VOTERS Clarke, George R.G. Cull, Robert Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes |
| geographic_facet |
Latin America & Caribbean ARGENTINA |
| relation |
Policy Research Working Paper;No. 2633 |
| description |
Based on results from country case
studies, many researchers have claimed that political
constraints affect bank privatization transactions, which in
turn affect the post-privatization performance of the
banking sector. But no study has either econometrically
tested how political constraints affect bank privatization
transactions or theretically modeled the privatization
transaction. The authors present a simple theoretical
framework that models the inherent tradeoffs faced by
governments and potential buyers in privatization
transactions involving banks. The potential buyer is
concerned about the probability that the bank will remain
solvent, about the profits it will earn after privatization,
and about the price paid for the assets and liabilities. The
government is concerned about the price received for the
assets, about layoffs, and about service coverage after
privatization. The evidence from bank privatization
transactions in Argentina in the 1990s supports several of
their theoretical predictions. In particular, provinces with
high fiscal deficits were willing to accept layoffs and to
guarantee a larger part of the privatized banks'
portfolio in return for a higher price. The tequila crisis
(Mexico's economic crisis in 1994-95) meant that
politicians could protect fewer jobs and had to assume a
greater share of their public banks' assets. Evidence
of better performance at banks privatized after
Mexico's crisis suggests that, by tying
politicians' hands, the crisis may have brought
unforeseen benefits. This conjecture awaits further
empirical validation, but the authors hope that by
explicitly incorporating the incentives politicians face,
analysis can begin to address the question of why some
privatizations succeed more than others. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Clarke, George R.G. Cull, Robert |
| author_facet |
Clarke, George R.G. Cull, Robert |
| author_sort |
Clarke, George R.G. |
| title |
Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes |
| title_short |
Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes |
| title_full |
Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes |
| title_fullStr |
Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes |
| title_full_unstemmed |
Bank Privatization in Argentina : A Model of Political Constraints and Differential Outcomes |
| title_sort |
bank privatization in argentina : a model of political constraints and differential outcomes |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/07/1552019/bank-privatization-argentina-model-political-constraints-differential-outcomes http://hdl.handle.net/10986/19582 |
| _version_ |
1764440075534336000 |