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Should I stay or should I go? A comparative study of banking sector policies and the strategies of Central American business groups

Published online by Cambridge University Press:  20 January 2017

Yuri Kasahara
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Abstract

The article seeks to explain how policies affect business groups’ decisions to stay or leave a sector of activity in a liberalized economy. The article utilizes a comparative historical approach to explain how business groups in six Central American countries decided to enter, remain in or leave the banking sector. Using case studies of the main banks belonging to business groups in the region, the article seeks to identify how particular sequences of policies lead to the formation of two major strategies. A portfolio one, characterized by a short-term interest in the banking sector; and an organic one, in which the banking sector plays a more important role for the whole group. Looking at the impact of three policies (nationalization, privatization and liberalization), I show that previous nationalization had contributed to a dominant portfolio strategy in Costa Rica and El Salvador. The absence of nationalization favored the dominance of an organic strategy in Guatemala and Honduras. Additionally, the cases of Nicaragua and Panama are analyzed as examples of how other events, such as early internationalization and early liberalization, can favor a more mixed scenario.

Type
Research Article
Information
Business and Politics , Volume 14 , Issue 4 , December 2012 , pp. 1 - 43
Copyright
Copyright © V.K. Aggarwal 2013 and published under exclusive license to Cambridge University Press 

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