countries NPL ratios are 2.3 percentage points lower compared to the pre-privatization ratios. Note that this is a reduction of around 42 percent of mean NPL ratio and thus is economically significant. Furthermore, the increase in number of employees after the privatization is subdued over time in high rule of law countries and these banks from high rule of law countries hold even less liquidity after privatization. Finally, in Panel B of Table 9, we focus on the financial development at the time of privatization and how it is related to privatization and various banking outcomes.

The results indicate that the post-privatization decrease in cost-to-income ratios and liquidity ratios over time is lower when the privatization occurs in a financially more developed country. Moreover, the banks which went through privatization in highly financially developed countries reduce their non-interest income generation much less and may even increase it over time, especially if the country has very high domestic credit to GDP (more than 100 percent). The results also suggest that the portfolio shift from interbank loans to corporate loans is mostly happening in lower financial development environments. Taken all together these results suggest that privatization offers significant benefits in lower financial development environments as well as implications for the optimal strategies of the privatizing banks.

# **4. Conclusions**

Building on a novel data set comprising 475 bank privatization events in 70 countries in emerging and advanced economies during the period from 1995 to 2017, this paper attempts to shed some light on recent privatization events and analyzes the relationship between privatization and banking outcomes. The first part of the paper offers some stylized facts. We find that bank privatizations increased sharply post-2000 and that China and India were the driving force behind the rise of privatizations post-2000. Following years of strong growth, privatization activity was more limited recently in other middle-income countries while privatizations in high-income countries remained broadly constant despite the wave of bank nationalizations in the aftermath of the GFC. Privatization proceeds were a relevant source of government revenues, including for many high-income countries. We also find that the average equity stake at sale per transaction declined over time and that the majority of bank privatizations involved governments selling their equity publicly in their domestic capital markets. Banks chosen to be privatized were consistently those showing underperformance in terms of profitability and quality of assets. Finally, we could not find evidence that bank privatization events were motivated by domestic banking crises.

The empirical part of the paper complements the existing empirical literature. The results suggest that post-privatization financial intermediation becomes more oriented toward corporate credit provision, a result driven by high income countries. Even though on average there are no significant post-privatization differences in bank bottom-line profitability (ROA), credit growth after privatization increases with some reduction in cost-to-income ratios and share of government securities over assets, while corporate loan share increases without significant change in NPL over loans. Moreover, privatizations associated with pre-privatization capital injection are associated with improved post-privatization bank performance. Finally, the results indicate that in highincome countries privatized banks perform better and with lower liquidity and lower costs. Privatized banks in developing countries, on the other hand, seem to be increasing their credit growth (albeit to still lower levels than their high-income country counterparts) as well as their number of employees post privatization.

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