2019, or Bircan and Saka, 2019, on political lending)). Hence, when it comes to banking, ownership does matter and privatization decisions are critical for economic outcomes. It is, however, important to consider that the argument for bank privatization does not mean that there is no residual role for SOCBs, especially in developing economies. In large countries, only SOCBs are likely to be willing to serve customers in remote areas and in chronically underserved segments such as agriculture, though this argument may be losing power as digital technologies increasingly permeate the banking industry. Another argument for the government to keep limited direct ownership of banks is that SOCBs exhibit less procyclical lending behavior than private banks (Bertay et al., 2015), which is crucial especially for small open economies. Being a second-best solution, it would be important to ensure that these banks are subject to the same supervisory requirements as private banks to avoid distortion and monitor accountability.

This paper aims to revive the public policy and academic debate around bank privatization by analyzing the following questions: What are the key trends and drivers in bank privatization in recent years? Does privatization affect banks’ performance and business models? What methods of privatization are prevalent and what maximizes post-privatization performance? Under what institutional, market and regulatory circumstances does privatization lead to stronger bank performance, if any? What are the implications of privatization on banking sector employment and credit provision and composition?

This paper complements the existing empirical literature on bank privatization by using a novel and up-to-date data set, which covers a large set of countries. Specifically, our data set covers 70 countries during 1995-2017 and allows to compare the pre- and post-privatization profile of banks and to analyze the associations between sale events and various bank-level measures such as financial performance, business model, and distributional effects. Stylized facts presented in this paper show that bank privatization did accelerate sharply post-2000, driven primarily by developments in China and India, and remained constant following the GFC. While the number of privatizations increased, the average equity stake at sale per transaction declined and it is no longer the case that the majority of sales involved significant changes in the control of financial institutions. Banks chosen to be privatized exhibited, ceteris paribus, a weaker performance and lower asset quality than market peers prior to the privatization event. Regarding the method of sale, our data show that the majority of privatizations took the form of public equity sales on domestic capital markets.

Furthermore, the empirical results suggest that the short-term associations between banking outcomes and privatization activities may differ from longer-term banking outcomes after large privatization events.<sup>8</sup> Simple before- and after-privatization mean comparisons indicate that banks going through large privatizations turn to more traditional banking models characterized by lower non-interest income shares and higher loans over assets ratios. Furthermore, privatized banks reduce their liquidity significantly while they hire more employees. These results can be interpreted as higher post-privatization financial intermediation and even though we do not find significant differences in bank bottom-line profitability (ROA), in our panel regressions we show that credit growth after privatization increases, with some reduction in cost-to-income ratios and not much change in nonperforming loans (NPLs) over loans.

> 8 We use 30 percent share sales as our large privatization event.

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