Crucially, the paper shows that if the privatized bank received a capital injection before privatization its performance measures improve compared to the earlier period as well as to privatized banks without recapitalization. The results, using sample splits between developing and advanced economy banks, indicate that privatized banks in high-income countries perform better and with lower liquidity and lower costs. Developing country banks, on the other hand, seem to be increasing their credit growth (though still lower than their high-income country counterparts) as well as their number of employees post privatization.

The rest of this paper proceeds as follows. The next section presents the data set and some stylized facts about recent trends in bank privatization around the world. Section 3 presents the empirical analysis that estimates the relation between privatization and bank financial performance, strategy, as well as the distributional implications. Section 4 concludes.

# **2. Data and stylized facts**

Our data set covers 475 privatization events, that is equity sales of SOCBs in 70 advanced and emerging economies over a period ranging from 1995 to 2017.<sup>9</sup> In terms of country level of income, two-thirds of the transactions refer to banks in middle-income countries, while the rest is mostly composed of public banks in high-income countries. The data set is compiled by merging information from multiple different data sources. The main source is the World Bank Privatization Database, but given that this database was discontinued in 2008, further bank privatization events were incorporated from additional sources, including the Securities Data Company (SDC) Platinum New Issues database and the Privatization Barometer’s online database on European transactions as well as their annual reports, which included a section on both EU and non-EU privatization trends and major deals. Current commercial bank ownership information was obtained from Fitch Connect. The privatization events were individually examined to exclude noncommercial bank privatizations, and also to incorporate events announced in financial media outlets such as the Financial Times or The Economist. Non-commercial bank sales excluded from our database include development banks (agricultural banks, industrial banks, export-import banks), financial companies associated to other industries (steel, real estate development), securities depositories and asset sales by central banks. Using the information from Igan et al. (2019), we excluded from our data set institutions that had received public financial support during the GFC and later proceeded to offer equity totally or partially to private investors.

Our data set allows us to detect important trends and developments in SOCB privatization, which are presented below as 10 key stylized facts:

- **Privatizations increased sharply post-2000.** The number of transactions doubled from 11 per year in the second half of the 1990s to an average of 20 per year in the pre-GFC period (200007). This trend accelerated after the GFC when the average number of transactions increased further to 27. Growth was even stronger in terms of proceeds, rising from an annual average of USD 6.8 billion (this and all further references in 2017 constant US dollars) in the late 1990s to USD 16.6 billion in the pre-GFC years and surging to USD 26.8 billion in the post-GFC years. These numbers count any sale of public banks’ equity as a transaction regardless of its size, though we consolidate these by year and entity. Only considering sales of more than 30

> 9 See section 3 for more details on the definition of privatization events.

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