Privatization in the Banking System and its Impact on the Profitability Indices

Privatization provides the possibility of achieving higher benefits for firms due to the increase of efficiency. This paper studies whether the banks privatization has created any benefits. The study has been conducted using data of 11 banks during a 13-year period (2006-2017). For the timing of major privatization (2009) and the imposition of restrictions on the country’s banking system in the form of sanction, two dummy variables are used to distinguish their effects. Also, three groups of panel regression tests, parametric and non-parametric tests are used. Panel regression model is used to examine the impacts of privatization on the profitability of the whole banking system and its results show that privatization has a positive and significant impact on the profitability of banks. Parametric and non-parametric tests are conducted with two objectives: comparing the performance of privatized banks with private and state banks and comparing the performance of the privatized banks in the periods before and after the privatization. The results indicate that there are significant differences during these two periods. The comparison of the performance of the privatized banks in the periods before and after the privatization with state and private banks show that the performance of the privatized banks are promoted compared to the state banks and is almost similar with private banks.