We jointly analyze the static, selection, and dynamic effects of domestic, foreign,
and state ownership on bank performance. We argue that it is important to include
indicators of all the relevant governance effects in the same model. "Nonrobustness"
checks (which purposely exclude some indicators) support this argument. Using data
from Argentina in the 1990s, our strongest and most robust results concern state
ownership. State-owned banks have poor long-term performance (static effect), those
undergoing privatization had particularly poor performance beforehand (selection
effect), and these banks dramatically improved following privatization (dynamic effect).
However, much of the measured improvement is likely due to placing nonperforming
loans into residual entities, leaving "good" privatized banks.