This study first re-investigates an old but still attractive issue: whether government-owned bank (GOB) performs inferior to the private-owned banks (POB) which is dubbed GOB effect in this study. Then, and more importantly, we explore why. Our government banks are classified into three types: GOBs that purchase distressed banks, GOBs that purchase normal banks, and GOBs that do not purchase any bank. We argue that not all three types of GOB are underperformer, that is, only GOBs purchase distressed banks are. Contrasting to the common belief, our results show that GOBs that purchase normal banks and GOBs that do not purchase any bank (after 2003) perform similar to POBs. That is, GOB effect significantly minimized when political interference is removed. Moreover, we found that POBs purchase distressed banks have similar performance to the benchmarked private banks. Thus, because both GOBs and POBs purchase distressed banks, the major difference is the presence of political factors in distressed-acquirer GOB. Accordingly, the reason of the worsened performance of GOBs is more likely a result of political intervention. Finally, we find these political interventions apparently exist in these countries no matter their country governance, corruption levels, and political rights.