STATE OWNERSHIP AND THE FINANCIAL PERFORMANCE
OF PRIVATIZED BANKS: AN EMPIRICAL ANALYSIS
James A. Verbrugge
William L. Megginson
Wanda L. Owens*
June 1999
Presented at the World Bank/Federal Reserve Bank of Dallas Conference on Banking
Privatization, Washington, DC, March 15th & 16th , 1999.
*The University of Georgia, the University of Oklahoma, and the University of Georgia,
respectively. We gratefully acknowledge the financial support of the University of Oklahoma’s
Michael F. Price College of Business and of the University of Georgia Research Foundation in
acquiring the date used in this study. This paper benefited from comments received at the World
Bank/FRB Dallas conference in Washington and at the 1999 European Financial Management
Association meeting in Barcelona. We are also grateful for comments received on a directlyrelated paper from participants at the 1998 Financial Management Association and 1999
American Finance Association annual meetings, the 1998 NYSE/Paris Bourse conference on
Global Equity Markets, the 1999 Conference on Privatization and the Kuwaiti Economy in the
Next Century, and seminars at the World Bank, the City University Business School (London),
London Guildhall University, and the University of Oklahoma. We also thank Bernardo
Bortolotti, Narjess Boubakri, Maria Boutchkova, Jean-Claude Cosset, Michael DeWally, Han
Kim, Kojo Menyah, Rob Nash, John Nellis, Jeff Netter, Enrico Perotti, and Nemat Shafik for
their specific comments and recommendations.
Please address correspondence to:
William L. Megginson
Professor & Rainbolt Chair in Finance
Michael F. Price College of Business
307 West Brooks, 205A Adams Hall
University of Oklahoma
Norman, OK 73019-4005
Tel: (405) 325-2058
Fax: (405) 325-1957
[email protected]
STATE OWNERSHIP AND THE FINANCIAL PERFORMANCE
OF PRIVATIZED BANKS: AN EMPIRICAL ANALYSIS
Abstract
This study investigates bank privatizations that use public security offerings as the
divestment mechanism. We discuss the terms of 58 initial unseasoned and 34 seasoned offerings
involving 65 banks from 12 high information economies and 13 emerging economies. We find
that bank IPOs tend to be very large, with a median offering size of nearly $300 million in high
information economies and $140 million in emerging economies. We document significant
positive average (median) initial returns of 30.5% (15.9%) for investors, but find that seasoned
issues are not significantly underpriced. We document limited improvement in bank
profitability, operating efficiency, leverage and non-interest revenue after privatization.
Substantial government ownership of banks remains even after privatization, and in only a few
cases is the government’s stake completely eliminated at the IPO stage, or even in subsequent
seasoned offerings. We suggest that continued significant government ownership of banks raises
serious problems for establishing market-oriented governance and decision-making systems in
the banks.
3
STATE OWNERSHIP AND THE FINANCIAL PERFORMANCE
OF PRIVATIZED BANKS: AN EMPIRICAL ANALYSIS
1.
Introduction
During the past fifteen years, a large number of commercial banks around the world have
been privatized by governments through public offerings of shares. In almost every case, this
represented a fundamental break with a national past that emphasized the strategic role of
commercial banking in funding the nation’s economic development, and the national
government’s key role in planning and directing that development.
Unlike privatizations of non-financial firms, where a substantial body of significant
literature and empirical evidence has emerged,1 relatively little is known about bank
privatizations around the world. This is somewhat surprising since banks, or least the banking
function, is indispensable in all economies. At the same time, it is not unexpected since data on
banks that have been privatized are so difficult to obtain, especially regarding financial
performance before and after privatization. Furthermore, banks have always been one of the
favorite tools of politicians and governments whereby chosen sectors, industries and firms could
receive funding on highly favorable terms, presumably in a manner consistent with the then
prevailing objective of the government in power. As such, to the extent that bank financial
statements are available, they are even more opaque than usual for an industry that under the best
of circumstances suffers from lack of transparency in financial reporting.
1
This literature is surveyed in Megginson and Netter (1998), and this paper is available
for downloading at www.nyse.com/public/thenyse/1e/1e4/wp98.05.htm. Other privatizationrelated working or published papers can be downloaded from http://cbaweb.ou.edu/~wmeggins.
4
In this paper, we empirically examine how the financial performance of a bank changes
after being fully or partially privatized via a public share offering, and test whether there appear
to be differential responses across countries. We also examine whether investors who purchase
the shares of such banks earn positive risk-adjusted abnormal returns initially (at the time of the
offering). Our findings of significant improvements in operating efficiency and profitability after
privatization will help governments develop divestment strategies that incorporate appropriate
incentives and rewards for managerial performance, while our short and long-run return findings
will help investment bankers properly assess demand for future bank privatizations and will help
investors determine whether they should participate in these often enormous share sales. At the
same time, we provide an analysis of why public share issue privatization may not be as effective
a vehicle for bank privatization as it is for privatization in the non-financial sector.
The paper proceeds as follows. Section 2 contains a brief overview of the bank
privatization literature and a discussion of the role of banking in a nation’s economy. Motives
for bank privatization are presented in Section 3. Descriptive information on the number and
size of share issue privatizations (SIPs) is reported in Section 4. An analysis of pre and postprivatization financial and operating performance is provided in Section 5. In Section 6, we
examine the initial returns earned by investors in SIPs, while an analysis of government
ownership of banks before and after privatization is presented in Section 7. Section 8 contains an
extensive discussion of some implications of our research effort.
2.
The Literature on Bank Privatization and the Economic Role of Banking
Regardless of where they are located, how they are organized, or the structure of their
ownership, banks tend to perform three basic functions in any economic system. First, they play
5
a central role in the country’s payments system and also serve as a clearinghouse for payments.
Second, they transform claims issued by borrowers into other claims that depositors, creditors, or
owners are willing to hold. Third, banks provide a mechanism for evaluating, pricing and
monitoring the credit granting function in an economy. Of course, the efficiency, safety,
effectiveness and transparency of these functions varies widely across countries depending on,
among other things, who owns the banks, how the credit-granting process is managed and to
whom credit is granted, and the degree to which bank-issued claims are held with some
confidence by the non-bank public. In the context of a country with a long history of state
ownership of commercial banks — or even significant state influence over commercial banking
— these efficiency, safety, and transparency concerns are often infinitely more complex and
intractable than is more laissez-faire economies.
The problems inherent in a state-owned banking industry have led many countries to at
least consider privatizing state-owned banks. Wherever and however banks are privatized, they
all face a common set of concerns and issues. These include: (1) the type of privatization process
to utilize, (2) whether and how to break up the government-owned banking (monobank) system,
(3) transferring ownership claims to the private (domestic or foreign) sector, (4) dealing with an
extremely low-quality loan portfolio, much of which is in default (albeit likely to be
unrecognized on a financial reporting basis), (5) ensuring an enhanced level of managerial talent
in the system, and (6) ultimately attracting outside (often foreign) capital and expertise to the
banking system.
There is little doubt that the financial sector in general, and banking in particular, plays an
important role in fostering the economic development of a nation. Rajan and Zingales (1998)
6
provide evidence supporting the positive influence of financial development on economic
development by means of reducing the cost of external financing to firms. They find that
financial development is especially important for the process of creating new firms in an
economy. Levine and Zervos (1998) also provide evidence suggesting that banking efficiency is
critically important to the development of an economy and that banking services are different
from those provided by stock markets.
In fact, an entire stream of research has now emerged documenting the critical importance
of an efficient financial system to sustainable economic growth. Important recent papers in this
literature are Demirgüς-Kunt and Maksimovic (1996), Levine (1997), Miller (1998), and Lev
(1999). Related papers stress the importance of creating the proper legal and regulatory
framework for encouraging the development of efficient, liquid banking and capital markets.
This literature is largely encompassed in a series of articles by La Porta, Lopez-de-Silanes, and
Shleifer (1999) and La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1997, 1998, 1999). The
basic themes that emerge from these research streams are that an efficient financial system is
vital, and that it is very difficult to construct from scratch or in place of existing (typically less
effective) systems, due to the determined opposition from entrenched parties. The most important
source of opposition to development of a modern, non-politicized financial system is usually the
state--and those with close ties to the existing power structure. This fact makes banking
privatization at least as important as a tool of political economy as it is as a mechanism for
banking reform.
Ensuring a smooth shift from state-owned banks to private banks is difficult even in
mixed capitalistic systems where only a few sectors, like banking, may have been nationalized.
7
Smooth shifts in the banking sector in economies that are virtually completely state-owned
(transition economics) are devilishly difficult. A number of recent papers outline the special
difficulties encountered by banks in these economies. Perotti (1993) shows that banks in these
countries have a strong, perverse incentive to fund former debtors, although these state-owned
enterprises (SOEs) are less efficient and more risky than private firms, because by doing so they
gain the potential repayment of previous debts. This inevitably leads to lower productivity of
investment and a greater concentration of risk. Furthermore, since privately-owned banks feel
this incentive just as strongly as state-owned ones, merely privatizing the banking industry will
not solve the problem. The incentive to subsidize former debtors is, however, magnified in the
all-too-frequent case where the state retains significant influence over the banks or the debtor
companies (or both) after these are nominally privatized. Perotti concludes that liquidation of
economically-hopeless SOEs will generally be preferable to eternal subsidization, since this will
both recognize the true value of the debt and remove the “debt overhang” from banks so they can
increase their lending to the more dynamic private sector.
Meyendorff and Snyder (1997) study the “transactional structures” of banking
privatizations in central and eastern Europe, which they define as having three elements: (1)
antecedent actions that determine the characteristics of the unit being privatized; (2) ownership
transfer and governance after privatization; and (3) follow-on actions and ongoing government
intervention. They note that most of the governments in the region made similar policy choices
when they began privatizing their banking systems, which have proven highly influential over
time. As examples, most governments chose not to seriously break up the socialist monobank
system, and most severely restricted new competition — particularly from foreign banks. For
8
these reasons, the former monobanks retain dominant market shares in most of the transition
economies almost a decade after reforms were initiated. Further, none of the politically-feasible
ownership transfer methods (voucher privatization, insider sales) brought in new capital or talent,
so all the region’s banking systems remain weak and noncompetitive. The prospect of EU
membership in the foreseeable future does, however, offer some hope that true restructuring
might begin soon.
Berglof and Roland (1998) focus on the pernicious problem of soft budget constraints in
transition economies. They demonstrate the pervasiveness of this problem, and show how
difficult it is to effectively solve. Whenever governments directly or indirectly influence creditgranting decisions, soft budget constraints arise endogenously due to the government’s lack of
credibility regarding liquidating a project (or SOE) rather than refinancing it. Hence,
mechanisms for hardening the budget constraint require endogenously restoring the credibility of
liquidation. The fact that this implies — in plain language — that a government must be willing
to allow troubled SOEs to go bankrupt and/or workers to be restructured out of employment
suggests just how painful true banking reform can often be. On the other hand, Schaffer (1998)
presents evidence that the soft budget constraint may be less of a problem than is commonly
assumed in transition economies, and that banks in particular enforce binding constraints on
commercial customers. Those soft budget constraints that are observed are typically statesponsored (usually allowing firms to have large tax arrears), and are far worse in “slow
reformers” (especially Russia) than in the faster reforming states of eastern Europe.
Bonin and Wachtel (1998b) provide an excellent analysis of the difficulties of achieving
market-based banking systems in transition economies. They emphasize that bank privatization
9
is only one step in the always painful process of disengaging the state from virtually complete
control over the banking system. Finally, Saunders and Sommariva (1993)analyze the difficulties
of transferring from state control to a market system with specific reference to Eastern Europe.
They investigate alternative approaches for restructuring troubled commercial banks. Beginning
with a pure bankruptcy approach, which they reject as a viable alternative, they address various
restructuring approaches including recapitalization, “loan hospitals” (bad bank approach), and
various types of debt-for-debt and equity-for-debt exchange. They also discuss the use of some
of the approaches used in other countries, like the RTC for the savings and loan debacle in the
United States. Their analysis demonstrates clearly the difficulty of managing and dealing with
only one problem in the bank privatization process, namely the troubled loan issue in the
monobank systems.
In contrast to the nonfinancial sector, where there is now a well-established body of
empirical literature on the effects of privatization [D’Souza and Megginson (1999)], the evidence
on bank privatization is only beginning to emerge. Meyendorff and Snyder (1997) provide
evidence on three case studies of bank privatization in Central Europe and Russia. They focus on
the process of privatization used in these instances and are able to offer several policy-type
conclusions such as the need to closely link privatization with recapitalization, the benefits of
rapid privatization, the importance of effective new corporate governance and the positive
influence of strategic foreign investors in the creation of a more efficient and healthy banking
system. Bonin and Wachtel (1998a) provide both a thorough literature review and an empirical
analysis of bank privatization activities in Poland, Hungary and the Czech Republic.
10
Other evidence on the process of bank privatization in Eastern Europe is provided in
Abarbanell and Bonin (1997), Abarbanell and Meyendorff (1997), Snyder and Kormendi (1997),
Svejnar (1997), and Thorne (1993). These studies provide evidence of the difficulty of bank
privatization in economies which are also transitioning from state-owned to private markets,
making bank privatization even more difficult because of the problems of political instability,
lack of banking expertise in the system (and in the economy), difficulties in assessing the depth
of troubled loans (estimated as high as 50% of total loans in some cases), the problem of carving
up the monobank system into a competitive system, and the inherent problem of placing a value
on the organization to be privatized. .2 Verbrugge and Yantac (1999) provide some preliminary
evidence on the process of bank privatization in Turkey where state-owned banks have been sold
to various domestic commercial and industrial firms.
As summarized above, it is clear that we know very little about some of the now standard
questions asked in the empirical studies of non-financial privatization. That is, what are the
favored approaches to bank privatization? What evidence is there on the pre versus postprivatization operating performance of privatized banks? What are the short-run and long-run
returns to investors who acquire and hold shares in privatized banks? Are there differences in
evidence depending on whether the bank privatization has occurred in transition economies or in
2
The papers presented at the World Bank/ Federal Reserve Banking Conference on Bank
Privatization also add significantly to this body of literature.
11
economies that already have a market system in other industries and where banking is one of the
few industries that is state-owned? And, most basic, how many banks have been privatized and
what has been the volume of capital raised for the governments as a result of these
privatizations? It is to these questions and issues that we now turn.
3.
Motives for Commercial Bank Privatization
Not all commercial bank privatizations are similarly motivated. At least four reasons for
bank privatization can be identified in countries around the world. First, in formerly socialist
economies, privatization has occurred on a widespread scale in many industries, as discussed in
detail in Megginson and Netter (1998). In these situations, bank privatizations occur as part of
the overall transitioning to a more market-based economic system. However, these countries
also provide the biggest challenge to successful privatization because so much of the credit
previously provided by the monobank systems was granted to SOEs, which tend to be of very
poor credit quality. As such, banks in transition economies tend to be plagued with the greatest
loan quality problems of all bank privatizations.
Second, in some countries there may be a program underway to de-nationalize the limited
number of sectors or firms that are state-owned. In such situations, privatization is less likely to
offer as great a challenge, at least in the loan quality area.
12
Third, in some economies there may be ongoing efforts to deregulate the overall financial
system. In this regard, bank privatizations are a necessary ingredient of the overall deregulation
effort. Finally, the governments in some countries may have the primary objective of raising
funds for the government itself. As such, banks may simply be one of the vehicles in the
“revenue privatization” motive. In the evidence presented below, we attempt to classify the bank
privatization into these categories by differentiating between what we call high information and
low information economies.
In any event, governments find it difficult to release control over commercial banks since
credit and direct grants are important lubricants in the engine of political control in economies
where SOEs are either dominant or exist on a more limited basis [see Boycko, Shleifer and
Vishny (1996) and Shleifer and Vishny (1994)]. Even in market-oriented economies like the
U.S., banks and credit allocation schemes are favored vehicles for setting special terms or
enhancing credit availability to favored sectors or groups. Indeed, even in the wave of mergers
and acquisitions in the U.S. in recent years, one of the “prices” for government approval of a
merger or acquisition has been the commitment of large sums of grants and credit to “community
development”.
4.
Descriptive Information on Bank Privatization: Number of Banks and Transactions
One of the biggest obstacles to investigations of bank privatizations is the lack of
data easily available from public sources. And, even when data are available, they vary widely
across countries in terms of what information is provided and the quality of the information
provided. In what follows, we rely on data sources such as Privatization International,
13
Euromoney, the Wall Street Journal, and especially the Financial Times as information sources
to identify the bank privatizations that have occurred and that also utilized pubic security
offerings as the privatization vehicle.3 Once the banks are identified, data are obtained from
sources such as Datastream and Moody’s International. In addition, we contacted all banks that
have executed share issue privatizations and requested copies of the prospectus used in the
offering of securities plus annual reports from both the pre and post-privatization periods. The
total sample of all banking share issue privatizations (SIPs) in our sample is presented in Table
1. Panel A presents data from banks in “high information” economies; that is, economies in
which economic and financial data are usually available on a regular basis. Most of these are
western-type (OECD) economies. The major exception is Poland, which we included in this
group because there were a number of share issue privatizations for which information was
available. Panel B of Table 1 presents banks from countries that we characterize as transition
and emerging economies.
**** Insert Table 1 about here ****
The combined sample in Table 1 includes a total of 65 bank privatizations from 25
countries. There are 44 privatizations in 12 countries that we define as high information
economies and 21 privatizations in 13 countries identified as transition or emerging economies.
France has the largest number of privatizations with 9, followed by Portugal with 7, Poland with
6, Italy with 5 and Norway with 4. There are a total of 102 transactions from these 65
3
We do not claim these listings to be a complete representation of all privatizations.
Some occur that are not reported (low information economies). Also, where other methods of
privatization were used such as vouchers, strategic investors (foreign or domestic) or private
placement, these transactions are not considered here.
14
privatizations, where a transaction is defined as an event in which a security offering occurred in
one of three forms: (1) an initial public offering (IPO) at the time of the privatization, (2) a
subsequent seasoned equity security offering (SEO), or (3) a private placement. Of the 72
transactions from the 44 banks from the high information economies, there are 41 IPOs, 23
secondary offerings, 6 private placements, and one offering we cannot identify.
Bank privatization security offerings tend to be of substantial size. As reported in the size
column of Table 1, the IPO issue size ranges from approximately $10 million to nearly $5 billion
in the high information economies. The mean IPO in these economies is $670 million while the
median is $288 million. The mean value of the 23 SEO offerings is $584 million with a median
of $364 million. Security offerings in the transition and emerging economies are somewhat
smaller with a range for the 17 IPOs of $5 million to $500 million, a mean of $174 million and
median of $142 million. The 11 secondary issues have a mean value of $84 million and a
median value of $49 million. Clearly, the issue sizes are much larger in the high information
economies, reflecting two fundamental differences; first, banks are larger in those economies and
second, capital markets have greater depth and liquidity to handle such large transactions.
Indeed, it is safe to say that a major impediment to share issue privatization in emerging
economies is the lack of a large equity market that can both readily absorb the security offerings
and provide the necessary liquidity to support active trading thereafter.
5.
Analysis of Pre and Post-Privatization Financial and Operating performance in
Privatized Banks
Following the lines of research on privatization in the non-financial sector, one of the
important aspects of privatization is to remove or reduce the influence of state ownership in the
15
operations of the firm. In the research from non-financial sectors, there are strong indications
that the operating performance of the privatized firms improves significantly in the postprivatization period. As reported in D’Souza and Megginson (1999), the mean and median levels
of profitability, sales and revenue generation, and operating efficiency increase significantly after
privatization.
If privatization is to be successful in banking, then one necessary, albeit not sufficient,
condition is for an improvement in the financial and operating performance of the banks that
have been privatized. Based on evidence from research on privatization in the non-financial
sector, we test for differences in the pre and post-privatization performance of bank profitability,
efficiency, revenue (sales) growth, and capital adequacy (leverage). Clearly, there are other
implications and aspects of bank privatization that are equally if not more important, such as
dealing with the bad loans in the bank system, the effects of privatization on credit allocation in
the economy, deposit insurance systems and governance issues. However, if banks cannot
improve their financial performance, based on some traditional financial measures, then the case
for share issue privatization as a method for privatizing the banking system is somewhat, if not
substantially, weakened.
In Table 2, we report those banks for which we are able to examine operating and
financial performance pre and post-privatization. To perform this analysis, we require
information from the bank’s income and balance sheet statements. Ideally, we want a full 7 years
of data, encompassing the three years before privatization through the three years afterwards. We
contacted all of the banks in our sample and requested a prospectus of the original privatization
transaction, plus income statement and balance sheet information of the bank subsequent to
16
privatization. We supplement the data received from the banks through financial statement
information found on Datastream, and in Moody’s International.
**** Insert Table 2 about here ****
To be included in the sample for financial analysis, we require data on the banks over a
period of not less than one year prior to the privatization through one year afterwards. Of the 65
banks in our original sample reported in Table 1, we identify 36 banks which have adequate
financial statement information for both the pre- and post-privatization periods. As shown, 31 of
the banks in Table 2 are located in 11 high information economies and 5 banks are from 4
emerging economies. France has the largest number of privatized banks in the analysis with
seven, followed by Italy and Portugal with five each.
For each firm in the sample, we collect information on total income, interest income,
interest expense, non-interest expense, total assets, total common equity, total advances (loans) to
customers, and total non-deposit debt. We then compute various profitability, efficiency,
revenue, and capital ratios for the sample, pre and post-privatization. The results on our pre
versus post-privatization operating and financial performance tests are reported in Table 3 for the
31 banks included in the high information country sample. We investigate the following
measures of financial performance:
•
profitability – as measured by return on assets and return on common equity
•
margin measures – as measured by net interest margin and profit margin
•
sales or revenue generation – as measured by non-interest revenue and total income as a
percent of assets
•
loan output – as measured by the ratio of loans or customer advances to assets
17
•
operating efficiency – as measured by non-interest operating expense relative to assets
•
leverage – as measured by non-deposit debt-to-assets and capital-to-assets ratios.
At the outset, it must be noted that these are accounting measures of financial
performance and are hence subject to all the weaknesses of such data. These weaknesses tend to
be exacerbated in this case, for several reasons. First, bank data are always opaque, and
especially so in privatization cases when different currencies are involved in the analysis,
financial reporting standards may vary, and different sources may be used to assemble the data.
Second, there is no adequate way to control for risk in these standard measures. For example,
improved profit performance could be achieved by taking on more risk. However, it is hard to
imagine greater risk than lending to SOEs at low or negative returns, as often occurs during the
banks’ pre-privatization stage. Sections A-G below investigate and test for the statistical
significance of the changes in bank performance between the pre and post-privatization periods.
A.
Profitability
In Table 3, we provide evidence on the profitability performance of the banks pre and
post-privatization. The specific measures used are return-on-assets (ROA) and return on equity
(ROE). We expect that switching from state ownership to at least partial private ownership
should produce higher ROA and ROE. We compute the mean and median ROA and ROE for the
three years prior to the privatization and evaluate it relative to the mean and median of the three
years following privatization. We then conduct two tests: a Wilcoxon test (Z-statistic)for the
difference between the medians pre and post-privatization, and a binomial test (also a Z-statistic)
for the significance of the fraction of sample firms that change as predicted. For the 32 banks in
the high information economies, the median ROA for the pre-privatization period is 0.34 percent
18
compared to 0.56 percent for the post-privatization period. As indicated by the Wilcoxon test
reported in Table 3, this is a significant improvement in profitability. The Z-statistic from the
proportion test also indicates significant improvement. Unlike the ROA results, the
improvement in median ROE from 7.06 percent to 10.85 percent is not significant, likely because
of the corresponding increase in the capital-to-asset ratio.
B.
Margin Measures
One of the most important margin measures in banking is the net interest margin (NIM)
which is the difference between interest income and interest expense relative to total assets. A
greater (positive) difference, meaning a higher NIM, indicates an improvement in lending
performance from the bank’s perspective. Better performing banks tend to have higher NIMs.
However, it takes substantial time to fundamentally alter a bank’s lending policies, loan mix and
loan yields. As such, we do not expect dramatic improvement in NIM immediately after
privatization. As reported in Table 3, the mean interest margin increases but not significantly,
while the median interest margin decreases slightly although not significantly from 2.38 percent
to 2.36 percent after privatization. This lack of significance is not unexpected because it
typically takes substantial time to both develop appropriate market-oriented lending policies and
to accumulate a properly-priced loan portfolio. To accomplish this objective in a very short time
frame would require very sharp changes in lending behavior and policies, something that might
not be possible without exceptionally large changes in ownership, governance and control.
Intuitively, we suspect sharp improvements in NIM would be more easily facilitated by
privatization via a strategic foreign investor route, particularly a foreign financial investor.
19
We also report the change in the profit margin, which admittedly is a less meaningful
measure for banks than for non-financials. In any case, the median ratio of net income to total
income improved significantly from 3.92 percent to 6.79 percent, indicating a substantial
improvement in the ability of the firm to bring revenue to the “bottom line”. The proportion test,
however, shows insignificant improvement for profit margin. These results are less positive for
net interest margin. The mean increases substantially, but the median is essentially unchanged. A
significant fraction of the firms (70%, Z=-2.19) actually experience a decrease in NIM.
C.
Revenue Generation
Privatized firms can be expected ultimately to enhance revenue production as a means of
improving financial performance. In a bank, this can be measured on a relative basis by the ratio
of total income to assets and also by the magnitude of non-interest revenue relative to assets.
Both measures are reported in Table 3. The mean ratio of non-interest revenue to total assets
increased from 2.37 percent to 2.75 percent while the median also increased slightly. Total
income to assets did not change significantly after privatization. Again, it takes time to establish
programs that enhance revenue, but it is somewhat surprising that there is such limited evidence
of revenue improvement.
D.
Loan Output
It is unclear whether privatized banks would be expected to increase or decrease the
importance of lending in the bank. One can easily argue that it would be rational to reduce
lending in the post-privatization mode as a response to the previously extensive credit extension
that was completely controlled by state policies and usually resulted in loans to SOEs. As such,
we have no expectation regarding the direction of the change. As reported in Table 3, the loan
20
ratio does increase on average and for most of the banks, but the change is not statistically
significant.
E.
Operating Efficiency
The literature from non-financial privatizations indicates that privatized firms
significantly improve their operating efficiency. We expect a similar finding for financial
institutions. As shown in Table 3, the operating efficiency measure, non-interest expense to
assets, declines modestly, indicating slight improvement in efficiency. The small reduction in
operating costs, albeit not significant, likely accounts for part of the improved profitability
performance shown above for return on assets (ROA).
At this point, we cannot identify the source of the efficiency gain. It may come from a
reduction in personnel, fewer occupancy expenses or simply overall reduction in costs. Since
state-owned banks as well as SOEs in general tend to have large number of employees, the most
logical source of efficiency gains would seem to be in reduction of personnel. Verbrugge and
Yantac [1999] document that the number of employees in state-owned banks in Turkey is wellabove that for private sector banks. If, as seems likely, this is generally true in most countries,
one would expect a transition to more private ownership to result in a decline in employment.
F.
Leverage
Finally, we examine two capital structure measures, the ratio of non-deposit debt to total
assets and the ratio of equity-to-assets. The latter is a variation of the well-known capital
adequacy measure in the banking literature. In the transition to private ownership, we expect a
reduction in leverage and an increase in the equity cushion since more of the risk of financial
distress is shifted to private sector owners. Both measures provide support for this perspective as
21
the median leverage ratio declines significantly, from 0.324 to 0.289, while the median equity
capital ratio increases significantly by approximately 100 basis points, from 0.0452 to 0.0559.
G.
Total Assets, Total Loans, Total Income and Net Income Pre and Post Privatization
We also analyze the pre vs. post-privatization behavior of the absolute level of assets,
loans, total income and net income for a small number (eleven) of banks for which we have a
complete set of data for seven years. In results not reported here, we find that without exception
the banks expand their asset holdings by amounts ranging from 16 percent to 200 percent by the
end of the third year following privatization. Loans increase by similar magnitudes, ranging from
a 19 percent increase to 170 percent in absolute terms. Total income increases by a median
amount of over 60 percent and net income by a median amount of slightly more than 100 percent.
An inspection of data from banks with less complete information revealed similar trends.
These figures, of course, reflect several factors, including inflation as well as general
bank expansion in the respective economies. At the same time, it is clear that the privatized
banks do not reduce their activities as measured by assets, loans, and total revenues. While the
sample size is too small to allow definitive conclusions to be drawn, this evidence of
performance improvements after privatization is certainly indicative.
H.
Conclusions From Pre and Post Performance Tests
In general, the results presented above provide limited support for our propositions
regarding the effect of privatization on performance. However, there are several reasons why
considerable caution must be exercised before concluding that share issue privatization in
banking is the solution to solving the SOE problem in financial services. Some of the reasons are
detailed below.
22
First, as mentioned earlier, the accounting measures we use in the tests are subject to all
of the concerns over accounting measures in banking, such as opaqueness, inconsistency across
countries, and inability to control for risk. Second, there are likely to be significant institutional
differences across countries in financial reporting and other areas, suggesting that testing for
significant differences between pre and post behavior using a sample of banks from different
countries may be problematic. Third, simply comparing banks’ pre and post-privatization
performance across countries may miss the fact that bank performance is likely to vary across
countries. As such, a more appropriate test might be to examine whether privatized banks in, for
example, Italy begin to look more like existing private sector Italian banks. This is an agenda
item for future research.
Finally, in the tests reported here we do not have information on one of the most
important dimensions of banking--namely, asset quality, as measured by loan loss reserves and
loan losses. Generally, data on these issues are not available from the data sources utilized.
Again, this is an agenda item for future research for at least a sub-sample of banks.
We also examine the performance measures shown in Table 3 for banks in each country
where there were at least three banks from that country in the sample. This includes France,
Germany, Italy, Norway and Portugal. Although sample sizes are too small for significance
testing, the results (not reported here) are similar to those shown in Table 3. We also calculate
the pre and post-privatization ratios for the five banks in the emerging economies reported in
Table 2. Perhaps surprisingly, these banks experience more pronounced improvements in ROA,
ROE, profit margin, non-interest revenue generation and in operating efficiency than do banks
23
privatized in developed economies. Again, due to the small sample, tests of significance are not
possible.
6.
Initial Returns to Investors in Bank Privatization Security Offerings
It is a well-documented finding that there are positive abnormal returns to shareholders in
initial public offerings. This result has also been established for IPOs in non-financial
privatizations, as summarized in Megginson and Netter (1998), and predicted by Perotti (1995)
and Bisais and Perotti (1997). Megginson, Nash, Netter, and Schwartz (1998) also report
positive long-run abnormal returns to investors in privatization IPOs, a finding that stands in
sharp contrast to the negative long-run return findings for non-privatization IPOs reported in
Loughran and Ritter (1995).
In Table 4, we report the initial returns for 18 bank privatization IPOs from high
information economies for which we can obtain information on the offer price and the first day
trading price. For these 18 unseasoned share issue privatizations, the average initial return is
30.5% while the median initial return to investors is 15.9%. Excluding three offerings of Polish
banks where the initial returns are very high (mean of 90%), the mean (median) initial return falls
to 18.6% (15%). These findings are generally in line with those from both non-privatization IPO
results and non-financial privatizations.
We also have limited information on secondary offerings reported in Table 4. For the six
secondary offerings for which we do have price information, the mean initial return is 5.9%
while the median initial return is 6.1%. Thus, based on this limited information, we conclude
that the seasoned secondary offerings are underpriced much less than IPOs.
24
As shown in Section B of Table 4, which contains information for bank privatizations in
transition and emerging economies, we are able to obtain price information on only 2 of the 15
IPOs and none of the 11 secondary offerings that occur in those countries. This is not surprising,
and it further supports the logic of our classification of these countries as “low information
economies”.
The paucity of reliable price information clearly portrays the difficulties of studying the
effects of share issue privatizations in banking, even in high information economies. Ideally, one
would be able to compare the initial bank share price returns in each country to other IPO returns
in that country, and also calculate the bank SIP returns on a market-adjusted basis. Limited
information prevents us from doing so. We can however conclude that even this limited
evidence lends support to the fundamental finding from other studies of initial security offerings,
namely that bank privatization IPOs also tend to be substantially underpriced.
The almost complete absence of price information of bank privatization in emerging
economies is not surprising. Generally, these countries suffer from lack of well-developed
capital markets, a lack of transparency in those markets that do exist, and limited disclosure of
information on security offerings. This suggests, unfortunately, that SIPs in the banking industry
may not be an ideal vehicle for reducing the state influence on banking in the absence of such
characteristics.
7.
Government Ownership Pre and Post-Privatization and Subscription Details
Table 1 reports statistics on government ownership before and after each privatization
transaction that occurred. These government ownership proportions are reported for 70
25
transactions in the high information economies and for 24 transactions in the emerging
economies. We also report mean and median government ownership following IPOs and also for
the secondary offerings, if there are multiple secondary offerings in the privatization process.
We also present information in Table 1 on the number of shareholders created,
subscription details in some of the cases, and the percentage of government ownership pre and
post-privatization. As can be seen, bank privatizations often create an enormous number of new
shareholders—over 3.8 million in the remarkable case of Compagnie Financiére de Paribas.
Given their smaller size, relatively fewer shareholders are created by banking privatizations in
developing economies, though the State Bank of India IPO created a respectable 1.4 million new
stockholders.
In those cases where we have information on subscription details, the issues in high
information economies tend to be heavily oversubscribed, with a mean of 15 times and a median
of 5 times. Not unexpectedly, this pattern of substantial over-subscription is not found in SIPs in
the emerging market economies. For the nine cases for which we have subscription information
in these markets, the mean over-subscription rate is 3.7 times (dominated by one outlier of 16
times) and the median is only 2 times. This again is consistent with the notion that lack of welldeveloped capital markets are an impediment banking SIPs in developing countries, because in
the high information economies and in non-financial privatizations, the over-subscription rates
are substantially higher.
Because there are several very interesting and revealing patterns that emerge from a
careful analysis of the data, we present below a discussion of these patterns, organized around a
series of questions.
26
1.
In How Many Instances is Government Ownership Eliminated Completely at the IPO
Stage?
Of the more than 60 bank privatizations that occur using public share offerings, we are
able to identify seven cases where government ownership is reduced to zero percent at the IPO
stage. As indicated by the listing in Table 4, five of these occur in France during the
privatization wave of 1987 and only one occurs in an emerging economy.
**** Insert Table 4 about here ****
2.
In How Many Additional Instances is Government Ownership Eliminated Completely by
One or More Secondary Offerings Following the Initial Transaction?
We identified eight additional banks where the government percent ownership is reduced
to zero by one or more subsequent offerings. These cases are identified in panel B of Table 4.
As indicated, multiple secondary offerings are utilized in the cases of Argentaria in Spain (3),
BCI in Italy (4) and SPA in Italy (2). Thus, of the 65 bank privatizations using the SIP approach,
only 15 (23 percent) of the banks are completely privatized. In the remaining cases, the
government retains partial ownership.
3.
For the 41 IPOs in High Information Economies and the 17 IPOs in Emerging
Economies, what ere the Mean and Median Government Ownership Proportions
Following the IPO?
As reported in the summary rows for Panels A and B in Table 1, the mean and median
government ownership for the 41 IPOs are 47 percent and 52 percent, respectively. For the 17
IPOs in emerging economies, the mean government ownership is substantially higher at 58
percent while the median is higher still at 72 percent. The extent to which governments retain
ownership after an IPO is portrayed in more detail in Table 5, where we report, by bank and by
country, the proportion of government ownership retained at the IPO stage for each transaction
27
where that information could be identified. As indicated, except for the French privatizations, in
most bank privatizations in most countries, governments retain majority (at least 50 percent)
ownership at the initial security offering stage. The evidence reported in Table 5 suggests that
less than 50 percent of the equity is sold in the majority (approximately 60 percent) of the IPO
transactions.
**** Insert Table 5 about here ****
An interesting question can be raised regarding the various degrees to which government
ownership is eliminated through an IPO; namely, whether initial returns are higher for those
cases in which the government stake is reduced to zero at the IPO stage. One might expect a
stronger initial price reaction in such cases relative to those in which government retains a
substantial or majority share of ownership. Although we do not have an adequate number of
initial returns to test for statistical significance, anecdotal evidence suggests this to be true. For
the French banks where government ownership is eliminated in the IPO stage, the mean (median)
initial return is 34.4 percent (21.4 percent). For those cases in other western economies in which
government ownership is not eliminated at the IPO stage, the mean (median) initial return is 11.3
percent (13.3 percent).
4.
Since Some IPOs are Followed by Subsequent Transactions (Secondary Offerings or
Private Placements), To What Extent is Government Ownership Retained Upon
Completion of the “Final Transaction”?
We define a final transaction as the last security transaction for a specific bank
privatization. This could be (1) the IPO, if it is not followed by a subsequent seasoned offering
or private placement, (2) the final seasoned offering following an initial transaction, and possibly
28
one or more subsequent offerings, or (3) a private placement following an IPO or secondary
offering.
We identify 58 transactions meeting the conditions outlined above and report the means
(median) in Table 6. For the 43 final transactions (Panel A), regardless of type (IPO, seasoned
offer, or private placement), in high information economies the mean (median) government
ownership retained is 32 percent (27 percent). For the 15 emerging economy cases, the mean
(median) proportion retained by the government is a substantially higher 57 percent (72 percent).
**** Insert Table 6 about here ****
In 25 high information economy cases, the IPO is the final transaction, with a mean
(median) post-issue government holding of 38 percent (37 percent). For the seven cases in
emerging economies where the IPO is the final transaction, the mean (median) holding post-issue
is substantially higher, at 74 percent (82 percent). In those cases where governments follow IPO
transactions with one or more secondary offerings, the mean (median) government ownership
percentage falls to 20 percent (5 percent) for the 13 final secondary offerings in high information
economies. However, in the emerging economies, government ownership remains at 49 percent
(57 percent) for the mean (median) of the seven final secondary transactions. Relatively few final
transactions are of the private placement variety. In panel D of Table 7, we report the results for
five transactions in the high information economies. The mean (median) government ownership
percentage for these cases is 31 percent (33 percent).
Based on our analysis of the proportion of ownership retained by government in the
privatization process, the following observations can be made. First, it is highly unlikely that
government ownership will be eliminated at the IPO stage, which confirms the prediction made
29
by Perotti (1995). This occurs in relatively few cases, and mostly in only one country. In more
than one-half of the IPOs, the government retains majority ownership at this stage. Second,
subsequent offerings substantially reduce government ownership, especially in high information
economies, to an average of 20 percent (median of 5 percent) for the 13 final secondary
transactions. Third, where the IPO is the final transaction and is not followed by a subsequent
secondary or private placement, the government ownership remains at more than one-third in the
high information economies. Fourth, in all cases--regardless of the type of final transaction-government ownership of banks remains much higher for the emerging economy transactions.
These findings on the degree to which states retain ownership of banks, especially at the
IPO stage and even more so in emerging economies, suggest somewhat pessimistic implications
for the success of bank privatization using the public share issue approach. One conclusion is
that governments are simply using bank SIPs as a revenue generating mechanism while retaining
significant if not dominant ownership in the banks after privatization. At the same time, as
outlined in more detail in the conclusions section below, it may then be more difficult to institute
appropriate market-oriented governance and decision-making systems in banks when the
government maintains such a large ownership stake, and correspondingly, a strong potential
influence over the bank’s operations.
8.
Summary, Conclusions, and Suggestions for Future Research
In this study, we examine more than 100 transactions involving 65 bank privatizations
that use the share issue offering approach to reduce government ownership in the banking sector.
Based on this investigation, we arrive at the following major conclusions:
30
•
Privatization is a process, not an event. In very few cases is state ownership eliminated
with a single share offering. In many cases, there are one or more seasoned offerings that
follow an IPO, and these transactions often occur a year or more after the initial offer.
•
The numerous cases in which privatization occurs in stages over time suggests that
revenue maximization is one of the forces driving bank privatization, along with the
government’s wish to retain its influence over the banking system. If the objective was to
eliminate state ownership, one transaction could accomplish that goal.
•
The high initial returns found for IPOs of bank privatizations are consistent with those
found in other non-financial privatization studies and for IPOs in general. These findings
are limited to the high information economies because pricing information for SIPs in the
transition and emerging economies is very limited. There is tentative evidence that initial
returns are higher for those IPOs where government ownership is eliminated completely
at the IPO stage.
•
Seasoned offerings appear to be significantly less underpriced than IPOs, although there
are very few price observations on which to base this conclusion.
•
In the high information economies, there is substantial oversubscription of the shares in
the SIPs, far above that for the offerings in emerging economies. This is consistent with
the fact that capital market conditions are significantly less robust in the emerging
economies.
•
In most cases, the state retains a significant, if not majority, ownership share in the bank
even after the IPO. Subsequent secondary offerings do have significant effects on
reducing the state ownership stake. The government ownership level after privatization
31
tends to be much higher in the transition and emerging economies than in the high
information economies. This state retention of ownership has negative implications for
the likelihood of establishing market-oriented banking in these markets.
•
We identify only seven cases in which government ownership is totally eliminated at the
IPO stage, and eight additional banks where state ownership is eliminated with one or
more subsequent, seasoned offering.
•
Despite the continued presence of significant state ownership, we do document some
improvement in bank operating and financial performance following privatization. On
average, profitability improves, operating efficiency improves, leverage declines slightly,
and there is some limited evidence of non-interest revenue enhancement. Increases in the
level of assets, loans, total income and net income indicate substantial size expansion
following privatizations. However, changes in the financial performance of privatized
banks appear to be much less pronounced than in the case of non-financial privatizations.
At this stage of research on the effects of share issue privatization on banking systems
and bank performance, there are few substantive conclusions that can be reached regarding, for
example, which bank privatizations have been the most successful. One difficulty is that no
accepted criteria exists for measuring success in bank divestitures. If the objective is to eliminate
government ownership and influence on the bank, then the most successful privatizations are the
fifteen cases where that was accomplished via IPOs and secondary offerings. If the objective is
the improvement in bank profitability, then the banks with the greatest increase in ROA or net
income are the most successful examples. One thing has become clear, privatization takes time
32
to unfold, especially if government ownership is reduced in stages—which is what typically
happens. As such, an analysis of pre and post-financial performance data around the time of the
IPO is likely to yield an incomplete picture of the effects of privatization. Clearly, privatization
is a process that unfolds over a time period that is often quite long.
There are numerous empirical issues and questions that remain to be addressed in further
work on this subject. This includes more specific empirical work on individual countries and on
different methods of privatization. For example, the strategic domestic conglomerate investor
approach reported in Verbrugge and Yantac (1999) seems to offer more promise for improving
bank performance after privatization than does the SIP approach studied here. Also, there are
significant data deficiencies for some of the most important aspects of banking, namely asset
quality pre and post-privatization, and lending output and behavior following privatization. The
issue of long-run returns to investors in bank SIPs is an also important one, albeit one that faces
serious methodological difficulties even under the best data and market information conditions
[Barber and Lyon (1997), Megginson, Nash, Netter, and Schwartz (1998)]. Finally, the financial
performance changes documented in this paper must be compared to those same measures in
other banks in the countries studied in order to separate the effects of privatization from general
banking trends.
We do believe that our study offers some suggestions and implications for the broader,
and fundamentally more important, issues surrounding bank privatization as a vehicle for
removing the influence of national governments from the banking sectors around the world.
Based on this study, and within the context of other privatization studies conducted on non-
33
financial firms, we conclude that the SIP approach may not work as effectively in the banking
sector as in the non-financial sector. This is true for the following reasons:
•
Since the government retains substantial partial ownership in the banks even after
privatization, it will retain significant influence over bank decisions in the absence of a
dominant private investor.
•
Other private ownership may be so diffused that the new private sector owners cannot
exert any significant influence over bank governance and bank operating decisions.
•
IPOs tend to favor entrenched managers, who themselves may become significant
owners. This makes it difficult to reduce the influence of insider control. It also
perpetuates control by those individuals who were probably managers in the bank prior to
privatization and who may have been instrumental in creating the asset quality problems
that exist in SEOs.
•
Successful IPOs require a reasonably well-established equity market to handle the IPO
transaction and the creation of subsequent trading liquidity.
•
Bank IPOs tend to be relatively large and difficult to execute, even for countries with
relatively well-developed capital markets. In emerging economies with less developed
capital markets, this is an even more serious problem.
Finally, based on this research and our understanding of the bank and non-bank
privatization literature available at this time, we conclude that there are a series of very important
issues and questions that must be addressed in order for bank privatization to be successful.
Some, if not most, of these issues do not come into the equation in non-financial privatizations.
34
For bank privatization to be successful in any country, a set of conditions must be
achieved that ensure the greatest likelihood for the establishment of a viable banking system. We
suggest that the following conditions represent the minimum conditions for achieving this goal.4
•
A deposit insurance system must be established that does not create serious moral hazard
problems (for example, 100% deposit insurance is not a wise system).
•
A bank regulatory system must be developed that is sufficiently independent from
political influence. This is essential for effective bank examination, supervision and
monitoring.
•
Governance systems must be instituted where truly independent shareholders control the
bank, have incentives to modernize its systems, and establish policies that orient bank
decision-making toward creating value for shareholders.
•
Financial reporting systems must be developed that allow for transparency, especially
with regard to asset quality and true profitability.
•
Effective methods of dealing with bad loans prior to and/or during the privatization
process are essential. This problem is especially severe in situations where uncollectable
loans are outstanding to state-owned enterprises (SOEs).
4
A number of these conditions are suggested for privatization in general in Smalhout
(1999). He classifies these points as “lessons for privatizers.”
35
•
It is essential to eliminate the culture and propensity of banks to lend to these SOEs after
privatization is critical, especially in economies with large remaining concentrations of
SOEs, and in transition economies
•
There must be assurances that if the government does retain partial ownership, it acts only
as a passive investor. This is essential to prevent the continuation of past creditallocation decisions made by the government, usually on some political or centralplanning basis.
•
The influence of insider control over bank policies and decisions must be reduced, since
these individuals were likely responsible for past decisions that may have led to the
problems. This may require a complete change in management.
•
Finally, and perhaps most controversially, governments may well need to emphasize sales
to foreign owners—particularly foreign commercial banks—in order to attract badlyneeded capital, expertise, technology, and financial legitimacy.
Bank privatization is one of the biggest challenges facing many governments around the
world. The reluctance of states to remove themselves from the banking and credit systems is
well-documented in this study and elsewhere. However, if the objective of a country is to
establish a more efficient and market-oriented economy, reducing the influence of the state
on credit allocation decisions is critically important.
36
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TABLE 1: Panel A
Details of Bank Privatization Share Offerings, Initial Returns, Subscription Details and Government Ownership
Bank Privatization in High Information Economies
%
Reserved
foreign
investors
49.00
29.00
%
Reserved
for
employee
2.20
1
10/93
11/93
20.30
51.00
Minimal
5
22.75
19.00
IPO
4/87
100.00
10
France
IPO
4/87
100.00
10
Company Name
Country
1
2
Bankwest
Commonwealth Bank
3
4
Commonwealth Bank
Girobank
5
Banque du Batimen et Travaux Publiques (BTP)
Banque Industrielle et Mobiliére
Privée (BIMP)
6
Date of
issue
Australia
Australia
Type
of
share
offer
IPO
IPO
1/96
8/91
Australia
Denmark
SEO
IPO
France
% of
capital
offered
7
8
9
10
Banque Nationale de Paris (BNP)
Compagnie Financiére de Paribas
Compagnie Financiére de Suez
Credit Commercial de France
France
IPO
10/93
73.00
11
France
France
France
IPO
IPO
IPO
1/87
10/87
5/87
100.00
80.00
48.99
10
10
10
9.00
15.00
11
Credit Local de France
France
IPO
12/91
27.50
None
20
12
Credit Local de France
France
SEO
6/93
30.50
None
10.50
13
Société Générale
France
14
Société Générale
France
15
Société Générale d'Alsacienne de
Banque (Sogenal)
Deutsche Pfandbrief-und
Hypothekenbank (DePfa-Bank)
Deutsche Pfandbrief-und
Hypothekenbank (DePfa-Bank)
Deutsche Siedlungs und
Landesrenten-bank (DSL)
Deutsche Verkehrskredit bank
(DVKB)
16
17
18
19
6/87
20.00
France
IPO
Priv.
place
IPO
6/87
59.10
10
3/87
100.00
10
Germany
IPO
3/91
46.50
None
Germany
Priv.
place
3/91
40.00
None
Germany
IPO
10/89
48.00
Germany
IPO
3/88
24.90
31.20
10.60
Israel
IPO
6/93
20.00
1.60
None
21
Bank Hapoalim
Israel
SEO
11/93
6.90
1.40
None
22
Bank Hapoalim
Israel
10/97
34.60
23
Bank Leumi
Israel
Priv.
place
IPO
8/93
27.00
NO
NO
7.02
13.33
100
0
NO
35.38
524,000
100
0
NO
21.43
2,800,000
100
27
NO
15.00
3,805,000
1,400,000
1,652,000
100
100
48.99
0
18.52
20(1)
0
NO
NO
NO
100
72.5
NO
72.5
42
NO
(2)
23.9
NO
23.9
3.9
NO
100
0
NO
100
53.5
NO
53.5
13.5
NO
100
52
NO
100
75.1
NO
100
80
NO
80
73.1
NO
70.59
100
65X
1,030,000
29X
Public: 5X
Instit: 2X
40X
20
10.7X
Dom: .36X
Intl: 4.0X
Dom: 17X
Intl: 7.0X
5.4X
Heavily
over-subsc
.53X only
half sold
37.60
1.57
50.25
49
287,500
2.5X
3.5X
Oversubscribed
Heavily
over-subsc
Oversubscribed
Oversubscribed
Oversubscribed
Bank Hapoalim
Initial
return
%
%
Govt
owned
after
51
71
46X
20
Primary
offer of
new
shares?
NO
YES
%
Govt
owned
before
100
100
Level of
share
demand
Over 200X
# of shareholders
created
67,387
187,981
2,298,000
850,000
83
73.1
35.5
NO
100
77.4
NO
25.85
5.76
16.82
6.14
80.00
Company Name
Country
% of
capital
offered
Date of
issue
3/96
1981
1984
3/86
3/87
15.90
50.00
25.00
33.00
16.70
%
Reserved
for
employee
18.37
%
Reserved
foreign
investors
24
25
26
27
28
Israel Discount Bank
Banca Commerciale Italiana (BCI)
Banca Commerciale Italiana (BCI)
Banca Commerciale Italiana (BCI)
Banca Commerciale Italiana (BCI)
Israel
Italy
Italy
Italy
Italy
Type
of
share
offer
SEO
IPO
SEO
SEO
SEO
29
Banca Commerciale Italiana (BCI)
Italy
SEO
3/94
54.80
7
31.60
30
Credito Italiano
Italy
SEO
11/91
6.30
78.00
31
Credito Italiano
Italy
SEO
12/93
58.00
32
Istituto Bancario San Paolo di
Torino
Italy
IPO
3/92
20.30
None
None in
offer
None in
offer
Level of
share
demand
37.00
17.60
39.00
Dom: 6.5X
Instit:15X
8X
Public
offer: 8X
1.5X
%
Govt
owned
after
79.01
85.14
85.11
61.2
60.1
Primary
offer of
new
shares?
NO
YES
YES
YES
YES
19,700
32,000
37,000
40,000
36,000
54.8
0
YES
65
58
NO
58
0
NO
10.99
100
79.7
YES
0.33
63(5)
31
56.9(6)
43.6
43.6
25
YES
49(7)
19
NO
100(8)
74
NO
64,843
33
Istituto Mobiliare Italian Spa
Italy
IPO
1/94
32.00
Oversubscribed
34
Mediobanca
Italy
12/88
13.30
N/A
35
36
Mediobanca
NMB-Postbank Groep (renamed
ING Bank)
Italy
Netherlands
Priv.
Place
IPO
10/89
18.60
IPO
12/89
30.00
8.60
40.00
2.5X
37
Christiania Bank
Norway
IPO
12/93
26.00
None
50.00
Oversubscribed
12/93
5.11
74
68.89
NO
16.50
19.80
95.90
None
100.0
(9)
0.4
57.00
71
52.15
4.1
YES
NO
NO
40.60
None
38
39
40
41
42
Christiania Bank
Norway
Den norske Bank (DnB)
Den norske Bank (DnB)
Fokus Bank
Union Bank of Norway (UBN)
(Sparebanken NOR)
Bank Gdanski
Bank Przemyslowo-Handlowy
(BPH)
Bank Rozwoju Eksportu (Export
Development Bank)
Norway
Norway
Norway
46
43
44
Priv.
place
IPO
SEO
IPO
5/94
6/96
10/95
Norway
IPO
12/95
62.70
2.60
39.00
Poland
IPO
1/95
50.10
2.2
30.80
Poland
IPO
7/92
47.50
10
Bank Slaski
Poland
10/93
40.90
7.50
47
Bank Slaski
Poland
IPO
Priv.
place
Open to
all
None
2/94
25.90
48
Polish Development Bank (Polski
Bank Rozwoju PBR)
Wielkopoiski Bank Kredytowy
Spolka Akcyjna (WBK)
Wielkopoiski Bank Kredytowy
Spolka Akcyjna (WBK)
Poland
IPO
3/95
16.60
None
Poland
IPO
4/93
55.72
20
Poland
SEO
6/94
25.60
49
50
9,900
13,465
19,969
13,824
87.5
71.9(10)
100
5.19
NO
NO
8.00
13.79
NO
Poland
45
Instit: 12X
Initial
return
%
%
Govt
owned
before
94.9(3)
89.9(4)
85.1(4)
70.7(4)
61.2(4)
# of shareholders
created
None
21,700
100
37.3
NO
100
49.9
NO
100
52.5
NO
30.97
100
59.1
NO
35.00
59.1
33.2
NO
997
100
83.4
YES
1,000
100(11)
44.28
YES
30(12)
22.3
YES
2X
11.4X
6.5%
Subsribed
Large
invest:13X
823,311
204.4
Company Name
51
63
64
65
Wielkopoiski Bank Kredytowy
Spolka Akcyjna (WBK)
Banco de Fomento e Exterior
Banco Espirito Santo e Comercial
de Lisboa (Besci)
Banco Espirito Santo e Comercial
de Lisboa (Besci
Banco Internacional do Funchal
(Banif)
Banco Internacional do Funchal
(Banif)
Banco Pinto & Sotto Mayor
Banco Pinto & Sotto Mayor
Banco Portugues do Atlantico
(BPA)
Banco Portugues do Atlantico
(BPA)
Banco Portugues do Atlantico
(BPA)
Banco Portugues do Atlantico
(BPA)
Banco Totta e Acores
Banco Totta e Acores
Credito Predial Portugues
66
67
68
69
70
71
Argentaria
Argentaria
Argentaria
Argentaria
Nordbanken
Stadshypotek AB
52
53
54
55
56
57
58
59
60
61
62
Country
Type
of
share
offer
Date of
issue
% of
capital
offered
%
Reserved
for
employee
Poland
SEO
1/96
17.20
Portugal
IPO
1/95
19.50
None
Portugal
IPO
7/91
40.00
6.5
Portugal
SEO
2/92
Portugal
IPO
Portugal
%
Reserved
foreign
investors
Level of
share
demand
# of shareholders
created
%
Govt
owned
before
%
Govt
owned
after
Primary
offer of
new
shares?
Initial
return
%
22.3
5.1
NO
100
80.5
NO
100
60
NO
60.00
60
0
NO
3/92
68.00
100
32
NO
11/92
32.00
32
0
NO
Portugal
Portugal
SEO
IPO
SEO
11/94
4/95
80.00
20.00
100
20
20
0
NO
NO
Portugal
IPO
10/90
33.00
1.2X
100
67
NO
Portugal
SEO
5/92
25.80
1.8X
67
41.2
YES
1.23
Portugal
SEO
7/93
17.50
1.21X
41.2
23.7
NO
7.64
Portugal
SEO
6/94
7.50
23.7
16.2
NO
Portugal
Portugal
Portugal
IPO
SEO
IPO
7/89
7/90
12/92
49.00
31.00
100.00
25
Spain
Spain
Spain
Spain
Sweden
Sweden
IPO
SEO
SEO
SEO
IPO
IPO
5/93
11/93
3/96
1998
10/95
10/94
24.90
24.20
24.80
26.70
34.50
34.40
8.80
None
2.1X
23,000
2.7X
.5X
2
33,177
5.00
8.6 empl
& others
25.00
10.00
3X
41,252
100
51
100
51
20
0
NO
NO
NO
8.80
45.80
Retail: 3.7
Instit: 8.6
5X
370,000
100
75.1
NO
13.29
75.1
51.5
26.7
100
100
50.9
26.7
0
65.5
65.6
NO
NO
NO
NO
YES
3.31
3.5
About 1.5
None
528,723
50.00
None
6X
Intl: 4X
122,000
525,098
4.67
IPO Average (median)
41
49.51
(47.50)
97
(100)
47
(52)
30.48
(15.9)
SEO Average (median)
23
26.04
(24.50)
63
(69)
22
(5)
5.90
(6.10)
Full Sample Average (median),
including private placements
71
39.57
(32.00)
79.42
(100)
41.02
(44.28)
24.33
(13.3)
Transaction Notes:
1 The government is no longer a major shareholder of the bank.
2 17% of share capital was privately held by individual shareholders prior to the privatization.
3 5.09% of share capital was owned by IDB Holding Company prior to the privatization. Ownership by IDB Holding Company was increased to 13.17% through the privatization.
4 11% of share capital privately held by individual shareholders prior to the privatization. Though a large number of shares were issued by BCI, the government purchased much of the new shares
issued, resulting in only a small reduction in percentage owned.
5 37% of share capital was held by 7 shareholders. Prior to the privatization there was no public market for the sale of the shares.
6 The bank was 56.9% owned by 3 controlling banks which banks were controlled by the Italian government. The balance of shares were owned by individuals. Banks continue to hold 25% of
Mediobanca.
7 The state owned just under 49% of the bank due to the conversion of a guarantee given by the state into shares of the bank. Originally, the state owned 86% of the bank, but share ownership was
reduced through private sales of shares by the state.
8 Due to Norwegian banking crises in early 1990, the government acquired all of the outstanding share capital of the bank.
9 Due to Norwegian banking crises in early 1990, he government acquired 87.5% of the outstanding share capital of the bank.
10 Prior to the secondary offer, the state acquired additional shares in th bank.
11 3.556MM shares (1.836M new shares) were isued in 1993 to EBRD (28.5%) and to the general public (27.2%). Total shares owned by the State Treasury after the privatization was 2.844MM
(44.3%)
12 Prior to the secondary offer, the State Treasury sold additional shares in the open market resulting in a reduction in ownership by the state to 30%.
TABLE 1: Panel B
Details of Bank Privatization Share Offerings, Initial Returns, Subscription Details and Government Ownership
Bank Privatization in Emerging Economies
Company Name
Country
%
Reserved
foreign
investors
Level of
share
demand
# of shareholders
created
%
Govt
owned
before
99.2
%
Govt
owned
after
0
Primary
offer of
new
shares?
NO
114,896
51.6
40.7(2)
YES
107,959
56.4(3)
53.23
NO
86,736
59.9(3)
56.72
NO
IPO
11/94
21.00
SEO
6/95
3.21
SEO
5/96
3.21
Egypt
IPO
11/93
26.25
Hungary
SEO
10/97
30.00
5
India
India
Jamaica
IPO
SEO
IPO
Priv.
place
2/94
10/96
12/86
29.90
27.80
51.00
2.53
12.80
2.16X
12/92
39.00
None
N/A
IPO
SEO
SEO
IPO
SEO
7/88
10/90
9/96
11/94
10/96
29.41
20.00
10.00
10.59
20.00
20.00
15
10
None
IPO
8/94
10.00
None
Morocco
IPO
1/95
35.00
3% of
capital
50(5)
15
NO
Morocco
SEO
4/96
15.00
None
15
0
NO
18.00%
None
100
82
NO
77.8
57
100
100
100
67
47.4
95
95
99
NO
NO
NO
NO
NO
Banco de Colombia
Zagrabacka banka d.a.
3
Komercni banka a.s.
4
Komercni banka a.s.
5
Komercni banka a.s.
6
Commercial International Bank
7
8
9
10
National Savings and Commercial
Bank (OTP)
State Bank of India
State Bank of India
National Commercial Bank
11
National Commercial Bank
Jamaica
12
13
14
15
16
17
18
Barclays Bank of Kenya
Kenya Commercial Bank
Kenya Commercial Bank
Kenya Commercial Bank
National Bank of Kenya
National Bank of Kenya
Citizens National Bank (Kookmin
Bank)
Banque Marocaine du Commerce
Exterieur (BMCE)
Banque Marocaine du Commerce
Exterieur (BMCE)
Kenya
Kenya
Kenya
Kenya
Kenya
Kenya
Korea
(South)
20
%
Reserved
for
employee
17
Date of
issue
1
2
19
% of
capital
offered
Type
of
share
offer
IPO
IPO
Colombia
Croatia
Czech
Republic
Czech
Republic
Czech
Republic
99.20
Initial
return
%
6/96
21
Credit Eqdom
Morocco
SEO
6/95
22
23
24
25
26
27
28
Sofac Credit
Societe Nationale d'Investissment
Philippine National Bank (PNB)
Philippine National Bank (PNB)
Chang Hwa Commercial Bank
First Commercial Bank
Hua Nan Commercial Bank
Morocco
Morocco
Philippin
Philippin
Taiwan
Taiwan
Taiwan
IPO
IPO
SEO
SEO
IPO
IPO
IPO
4/94
10/94
5/89
12/95
10.80
10.00
4.67
4.68
0.47
100% GDR
100% GDR
None
30%
before
10
21.90
1.5X
10,900
100
73.75
NO
None
None
1.9X
1,400,000
1,400,000
30,754
98.2
68.3
100
68.3
40.5
49
YES
YES
NO
39(4)
0
NO
None
None
None
None
None
80
70.59
60
80
60
16X
Open to
all
None
27.80
None
None
None
100
80
70.59
100
80
1.48X
1.8X
3X
2.5X
+3X
NO
NO
YES
YES
NO
NO
NO
20,000
1.69
50.48
29
30
Company Name
Country
Type
of
share
offer
Date of
issue
International Commercial Bank of
China (ICBC)
Taiwan
IPO
12/71
Krung Thai Bank
Thailand
IPO
7/89
% of
capital
offered
17.70
28.60%
%
Reserved
for
employee
%
Reserved
foreign
investors
Level of
share
demand
None
Undersubscr
# of shareholders
created
%
Govt
owned
before
%
Govt
owned
after
100
82
NO
100
71
NO
Primary
offer of
new
shares?
Initial
return
%
IPO Average (median)
17
26.32
(20.50)
96
(100)
58
(72)
26.09
(26.1)
SEO Average (median)
11
14.42
(20.50)
68
(78)
43
(52)
0
(0)
Full Sample Average (median),
including private placements
30
22.06
(20.00)
84.88
(99.60)
58.50
(67.00)
26.09
(26.1)
Transaction Notes:
1 The bank sold 7.992 billion shares at an offer price of US $.03/share.
2 In 1992, 48.4% of the share capital of the bank was issued to the public through a coupon privatization program. Thus the ogvernment owned only 51.6% of the bank of privatization. Rights
issue of 4.0MM new shares reduced the government ownership to 40.7%.
3 Prior to this secondary issue, the government acquired additional shares in the market.
4 Prior to this secondary issue, the government sold additional shares in the market.
5 Prior to the bank privatization, the State and state-owned entities owned 50.01% of the share capital of the bank. The remaining shares were owned by Moroccan financial institutions, foreign
commercial banks, and the public.
TABLE 2: Panel A
Banks With Adequate Information for Analysis of Pre- and Post-Privatization Operating Performance
High Information Economies
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Bank of Western Australia
Commonwealth Bank
Banque Industrielle et Mobiliere Privee
Banque Nationale de Paris
Compagnie Financiere de Paribas
Compagnie Financiere de Suez
Credit Commercial de France
Societe Generale
Societe Generale d'Alsacienne de Banque (Sogenal)
Deutsche Pfandbrief-Und Hypothekenbank (Depfa-Bank)
Deutsche Siedlungs und Landesrentenbank (DSL)
Deutsche Verkehrs Kredit Bank (DVKB)
Bank Hapoalim
Bank Leumi
Banca Commerciale Italiana Spa
Istituto Bancario San Paolo Torina SpA
Istituto Mobiliare Italian SpA
Mediobanca
NMB Postbank Groep NV
Christiania Bank
Den norske Bank (DnB)
Fokus Bank
Bank Slaski
Wielkopolski Bank Kredytowy Spolka Akcyjna
Banco Espirito Santo e Comercial de Lisboa (Bescl)
Banco International do Funchal (Banif)
Banco Pinto & Sotto Mayo
Banco Portugues do Atlantico (BPA)
Banco Totta Acores (BTA)
Argentaria
Norbanken AB
Date
of
Issue
1/22/96
8/1/91
4/24/87
10/20/93
1/31/87
10/5/87
5/7/87
6/27/87
3/21/87
3/7/91
10/1/89
3/1/88
6/1/93
8/1/93
1981
3/31/92
1/1/94
10/28/89
12/6/89
12/16/93
5/1/94
10/8/95
10/15/93
4/23/93
7/1/91
3/25/92
11/1/94
12/11/90
7/1/89
5/11/93
10/20/95
Type
of
Sale
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
IPO
Country
Australia
Australia
France
France
France
France
France
France
France
Germany
Germany
Germany
Israel
Israel
Italy
Italy
Italy
Italy
Netherlands
Norway
Norway
Norway
Poland
Poland
Portugal
Portugal
Portugal
Portugal
Portugal
Spain
Sweden
AVERAGE
Issue Size
($US
Millions)
325
1,017
16
4,920
989
3,340
271
1,451
250
1,340
241
10
300
428
1,070
627
259
215
291
141
9
450
255
382
213
2,065
893
806
TABLE 2: Panel B
Banks With Adequate Information for Analysis of Pre- and Post-Privatization Operating Performance
Transition and Emerging Economies
Name
1
2
3
4
5
Komercini Banka
State Bank of India
NCB Group Limited
Kenya Commercial Bank
National Bank of Kenya
Date
of
Issue
11/1/94
2/3/94
12/3/86
7/19/88
11/2/94
Type
of
Sale
IPO
IPO
IPO
IPO
IPO
Country
Czech Republic
India
Jamaica
Kenya
Kenya
AVERAGE
Issue Size
($US
Millions)
452
17
8
10
122
TABLE 3
Analysis of Financial and Operating Performance of Pre-and Post-Privatized Banks
A. High Information Economies
VARIABLES STUDIED
N
MEAN VALUE
(MEDIAN)
BEFORE
PRIVATIZATION
MEAN VALUE
(MEDIAN)
AFTER
PRIVATIZATION
MEAN
DIFFERENCE
(MEDIAN)
PRE -VS- POST
PRIVATIZATION
Z-STATISTIC
Z-STATISTIC FOR
DIFFERENCE IN
MEDIANS
(AFTER-BEFORE)
NUMBER OF
FOR
FIRMS THAT
SIGNIFICANCE
OF PROPORTION
CHANGE
CHANGED AS
PREDICTED
Return of Assets
net income/total assets
31
.0055
(.0034)
.0082
(.0056)
.0028
(.0010)
2.6063***
22
2.3349***
Return on Equity
net income/total common equity
31
-.0335
(.0706)
.1371
(.1085)
.1706
(.0047)
.9210
19
1.2572
Profit Margin
net income/total income
31
.0460
(.0392)
.0732
(.0679)
.0272
(.0063)
1.9009**
19
1.2572
Net Interest Margin
(Interest income - interest
expense) / total assets
30
.0149
(.0238)
.0243
(.0236)
.0094
(-.0024)
-1.6969
9
-2.1909
Non-interest Revenue Production
non-interest income/total assets
29
.0237
(.0162)
.0275
(.0167)
.0037
(.0013)
1.4379*
19
1.6713**
Income to Assets
total income/total assets
30
.1111
(.1068)
.1090
(.1005)
-.0021
(-.0009)
-.4217
15
.0000
Loan Output
customer advances/total assets
31
.5095
(.4867)
.5298
(.5104)
.0203
(.0110)
-.1372
17
.5388
Operating Efficiency
non-interest expense/total assets
27
.0280
(.0252)
.0273
(.0221)
-.0007
(.0000)
.0480
14
.1925
Leverage
non-deposit debt/total assets
31
.3243
(.3072)
.2892
(.2392)
-.0351
(-.0067)
-1.8225**
20
1.6164*
Capital Ratio
equity/assets
31
.0452
(.0390)
.0559
(.0495)
.0107
(.0076)
3.1159***
24
3.0533***
***, **, * indicates significance at the 1%, 5%, 10% level.
Wilcoxon Text Evaluated:
Z=
W O
n (n + 1) (2n + 1) / 6
where W is the number derived from the sign rank test. The procedure tests whether the median difference in variable
values between the pre- and post-privatization samples is zero.
Z-Statistic for Significance of Proportion Change:
H o : p = p0 = 0.5
H 1 : p > p0
Z=
y / n po
p0 (1 p0 ) / n
where y is the number if firms that changed as predicted.
TABLE 4
Banks Using Share Issue Privatizations in Which Government Ownership Was Totally Eliminated
A. Government Ownership Eliminated at IPO Stage
GOVERNMENT OWNERSHIP
PRE-IPO
POST-IPO
INITIAL
RETURN (%)
$16
100%
0%
35.4
4/87
16
100
0
21.4
France
1/87
989
100
0
18.5
Credit Commercial de France, SA
France
5/87
271
49
0
16.8
Societe Generale d’Alsacienne de Banque (Sogenal)
France
3/87
250
100
0
80.0
Credito Predial Portugues
Portugal
12/92
100
0
N.A.
Banco de Colombia
Colombia
100
0
N.A.
COUNTRY
ISSUE
DATE
Banque du Batiment et Travaux Publiques (BTP)
France
4/87
Banque Industrielle et Mobiliere Privee (BIMP)
France
Compagnie Financiere de Paribas
BANK NAME
SIZE
($US mn)
500
B. Government Ownership Eliminated Following One or More Secondary Offerings
COUNTRY
IPO DATE
BANK NAME
Banca Commerciale Italiana (BCI)
Italy
Credit Italiano (SPA)
Italy
SECONDARY OFFERINGS
TO ELIMINATE GOVERNMENT
SHARE
IPO ISSUE
SIZE
($US mn)
1981
DATE OF
FINAL
OFFERING
GOVERNMENT
OWNERSHIP
POST-IPO
INITIAL
RETURN
IPO
85%
N.A.
4
3/94
65
N.A.
2
12/93
NUMBER
Banco Espirito Santoe Commerciale de Lisboa (BESCI)
Portugal
7/91
450
60
N.A.
1
2/92
Banco Internacional do Funchal SA (BANIF)
Portugal
3/92
70
32
N.A.
1
11/92
Banco Pinto & Sotto Mayor
Portugal
11/94
20
N.A.
1
4/95
Spain
3/93
850
75
13.3
3
1998
National Commercial Bank
Jamaica
12/86
17
49
N.A.
1
12/92
Banque Morocaine du Commerce Exterior (BMCE)
Morocco
1/95
169
15
N.A.
1
4/96
Argentaria
Source: Table 4.
TABLE 5
Evidence on Government Ownership of Banks Following IPO in Share Issue Privatizations, By Country
PERCENT GOVERNMENT OWNERSHIP POST-IPO
BANK PRIVATIZATION IPO
NUMBER OF
BANK
PRIVATIZATION
IPOS
#1
#2
#3
#4
#5
#6
#7
#8
#9
Australia
2
51
71
-
-
-
-
-
-
-
Denmark
1
49
-
-
-
-
-
-
-
-
France
9
0
0
27
0
20
0
73
52
0
Germany
3
54
52
75
-
-
-
-
-
-
Israel
2
77
77
-
-
-
-
-
-
-
Italy
5
85
65
80
31
N.A.
-
-
-
-
Norway
4
69
72
41
60
-
-
-
-
-
Poland
6
37
50
52
36
83
44
-
-
-
Portugal
7
81
60
32
20
67
51
0
-
-
Spain
1
75
-
-
-
-
-
-
-
-
Sweden
2
66
34
-
-
-
-
-
-
-
Colombia
1
0
-
-
-
-
-
-
-
-
Croatia
1
N.A.
-
-
-
-
-
-
-
-
Czech Republic
1
41
-
-
-
-
-
-
-
-
Egypt
1
74
-
-
-
-
-
-
-
-
India
1
68
-
-
-
-
-
-
-
-
Jamaica
1
49
-
-
-
-
-
-
-
-
Kenya
3
N.A.
80
80
-
-
-
-
-
-
South Korea
1
N.A.
-
-
-
-
-
-
-
-
Morocco
1
15
-
-
-
-
-
-
-
-
COUNTRY
Source: Table 1.
TABLE 6
Mean and Median Government Ownership
Following Final Privatization Transaction1
A. All Final Transactions2
High Information Economies (43)
Emerging Economies (15)
Mean
Median
Mean
Median
32%
27%
57%
57%
B. IPO as the Final Transaction
High Information Economies (25)
Emerging Economies (7)
Mean
Median
Mean
Median
38%
37%
74%
82%
C. Secondary Offering as the Final Transaction
High Information Economies (13)
Emerging Economies (7)
Mean
Median
Mean
Median
20%
5%
49%
57%
D. Private Placement as the Final Transaction3
High Information Economies (5)
Mean
Median
31%
33%
Notes:
1. Final transaction defined as the last security offering identified in a bank privatization. It may be the IPO,
the last secondary offering following an IPO or a previous secondary offering, or a private placement.
2. Number of transactions indicated in parentheses.
3. There was one private placement as the final transaction in the emerging economies group.
Source: Calculated from information in Table 1.