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.

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