The Impact of the Economic Crisis on East Asia
Show Less

The Impact of the Economic Crisis on East Asia

Policy Responses from Four Economies

Edited by Daigee Shaw and Bih Jane Liu

Written by a distinguished group of Asian social scientists, this study summarizes and synthesizes the economic impacts of the crisis on individual countries and their policy response since 2008, and in particular carefully scrutinizes the immediate and remote causes of the crisis. It not only offers an assessment of its impacts, and identifies specific country measures that can be undertaken to stabilize the situation, but also looks at the crisis from three important economic perspectives: that of a healthy fiscal system, international trade, and the energy market.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 3: De-Privatization? Case Studies of Government Banks’ Performance in Developing Countries During the Financial Crisis

Chung-Hua Shen and Chih-Yung Lin


Chung-Hua Shen and Chih-Yung Lin 3.1 INTRODUCTION The financial crisis of 2008–09 raises the issue of the performance of government-owned banks (GOBs). Because most of the privately-owned banks (POBs) were hit severely by the crisis, governments started injecting funds to rescue them and thus nationalizing them. This de-privatizing action seems to go against the privatization tide that has run since the 1980s. Because of this nationalization process, researchers are wondering whether this de-privatizing process implies that GOBs perform better than privately owned banks. This issue is interesting because empirical studies argue typically that private banks perform better regardless of profitability measures, regions and sample periods. For simplicity, the underperformance of governmentowned banks is termed ‘the GOB effect’. For example, Mian (2003), using 250 GOBs from 71 emerging economies, found that government banks uniformly underperform private banks. Iannotta et al. (2007), using an enlarged sample, found that government banks have lower profitability and loan quality, and a higher insolvency risk, than private banks. Furthermore, Cornett et al. (2008) found that government banks are significantly less profitable than private banks. Micco et al. (2007) also identified government bank underperformance in less-developed countries (LDCs)1 but not developed countries (DCs). So how could a well-accepted concept be suddenly refuted by the evidence observed during the financial crisis of 2008? We argue that the typical conclusion that government banks perform worse arises from cases where the GOB is requested to purchase a distressed bank. We thus propose a political hypothesis to explain why...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.