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Are Public Sector Banks in India a Government Failure? A Comparative Empirical Analysis of Public Sector and Private Sector Banks
[Les banques du secteur public en Inde sont-elles un échec pour le gouvernement ? Une analyse empirique comparative des banques du secteur public et du secteur privé]

Author

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  • Sahil CHOPRA

    (CEPN - Centre d'Economie de l'Université Paris Nord - LABEX ICCA - UP13 - Université Paris 13 - Université Sorbonne Nouvelle - Paris 3 - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité - Université Sorbonne Paris Nord - CNRS - Centre National de la Recherche Scientifique - Université Sorbonne Paris Nord)

Abstract

This paper seeks to examine the relation between banks' profitability and ownership in India. The justification to measure the impact of ownership comes from the theory of government failure. An independently constructed dataset containing all commercial public and private sector banks in India as of April 2020 is used. The data ranges from 2004 to 2020. Banks' characteristics are collected from respective banks' websites, and the hypotheses are tested by estimating an econometric model, i.e., the pooled OLS mod- el. In conclusion, the government owned banks' performance is inferior compared to pri- vate banks. This can be accredited to the huge amount of loans sanctioned in priority sec- tors and fraudulent cases due to the presence of interest groups, corruption, and ineffi- ciency of employees in public sectors.

Suggested Citation

  • Sahil CHOPRA, 2022. "Are Public Sector Banks in India a Government Failure? A Comparative Empirical Analysis of Public Sector and Private Sector Banks [Les banques du secteur public en Inde sont-elles un échec pour le ," Post-Print hal-04006720, HAL.
    • Handle: RePEc:hal:journl:hal-04006720
    Note: View the original document on HAL open archive server: https://sorbonne-paris-nord.hal.science/hal-04006720
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    References listed on IDEAS

    as
    1. Levy Yeyati, Eduardo & Micco, Alejandro & Panizza, Ugo, 2004. "Should the Government Be in the Banking Business?: The Role of State-Owned and Development Banks," IDB Publications (Working Papers) 1543, Inter-American Development Bank.
    2. Glenn Furton & Adam Martin, 2019. "Beyond market failure and government failure," Public Choice, Springer, vol. 178(1), pages 197-216, January.
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    6. Micco, Alejandro & Panizza, Ugo & Yanez, Monica, 2007. "Bank ownership and performance. Does politics matter?," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 219-241, January.
    7. Faozi A. Almaqtari & Eissa A. Al‐Homaidi & Mosab I. Tabash & Najib H. Farhan, 2019. "The determinants of profitability of Indian commercial banks: A panel data approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 168-185, January.
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    Keywords

    government failure; empirical analysis; public sector banks; panel data; pooled OLS model;
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