Hidden Government Influence over Privatized Banks
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Assaf Hamdani
Abstract
In this Article we examine Israel’s ongoing process of bank privatization to explore the link between privatization programs and the ownership structure of public companies. Our thesis is that concentrated ownership provides regulators with a platform for exerting informal influence over corporate decision-making. This platform serves regulators as a safety valve when all else fails, especially when they would like firms to terminate senior executives or board members. Communicating with controlling shareholders increases the likelihood that both the regulatory intervention and the reasons underlying it will remain confidential. Moreover, controlling shareholders can make swift decisions and implement them quickly, with no need for formal group deliberation. When informal influence is important — as in the case of banks — the government may prefer firms with controlling shareholders to widely held firms. It may therefore prefer to sell a control block in the firm undergoing privatization rather than distribute its shares through the stock market.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Article
- Introduction
- Governments as Investors of Last Resort: Comparative Credit Crisis Case-Studies
- Bank Nationalizations of the 1930s in Italy: The IRI Formula
- Crowding Theory and Executive Compensation
- Why Power Companies Build Nuclear Reactors on Fault Lines: The Case of Japan
- Corporate Governance under State Control: The Chinese Experience
- The Unintended Consequences of State Ownership: The Brazilian Experience
- Can Company Disclosures Discipline State-Appointed Managers? Evidence from Greek Privatizations
- Hidden Government Influence over Privatized Banks
- State Intervention in Corporate Governance: National Interest and Board Composition
- Hidden Costs of Mandatory Long-Term Compensation
- Global Investment Regulation and Sovereign Funds
Articles in the same Issue
- Article
- Introduction
- Governments as Investors of Last Resort: Comparative Credit Crisis Case-Studies
- Bank Nationalizations of the 1930s in Italy: The IRI Formula
- Crowding Theory and Executive Compensation
- Why Power Companies Build Nuclear Reactors on Fault Lines: The Case of Japan
- Corporate Governance under State Control: The Chinese Experience
- The Unintended Consequences of State Ownership: The Brazilian Experience
- Can Company Disclosures Discipline State-Appointed Managers? Evidence from Greek Privatizations
- Hidden Government Influence over Privatized Banks
- State Intervention in Corporate Governance: National Interest and Board Composition
- Hidden Costs of Mandatory Long-Term Compensation
- Global Investment Regulation and Sovereign Funds
