Optimal level of state ownership in banks: prevention measure versus emergency action—evidence from the new millennia

Emilios Galariotis (), Iordanis Kalaitzoglou (), Jacek Niklewski () and Constantin Zopounidis ()
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Emilios Galariotis: Special Interest Group in Regulation, Market Structure and Asset Pricing
Iordanis Kalaitzoglou: Special Interest Group in Regulation, Market Structure and Asset Pricing
Jacek Niklewski: Coventry University
Constantin Zopounidis: Special Interest Group in Regulation, Market Structure and Asset Pricing

Annals of Operations Research, 2021, vol. 304, issue 1, No 7, 165-197

Abstract: Abstract Previous literature is rather inconclusive concerning the impact of state ownership on banks. We report that its overall impact is not monotonic as it has so far been implicitly assumed, and that it depends on a contemporaneous conflicting impact on risk and financial performance. This suggests the existence of an optimal level, which we investigate by comparing the relative “overall performance” and efficiency of the institutions. We show that a minimal presence, as opposed to no state ownership can improve performance and efficiency, reduce the likelihood of a bailout, while it is less costly compared to capital injections.

Keywords: State ownership; Optimal level; Bank efficiency; Indirect impact bank regulation; Macroeconomic shocks (search for similar items in EconPapers)
JEL-codes: C14 C33 G21 G28 G32 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10479-021-04085-1

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