Are the effects of market concentration and income diversification on banking performance persistent?

Mendoza, Jorge Andrés Muñoz; Yelpo, Sandra María Sepúlveda; Ramos, Carmen Lissette Veloso; Fuentealba, Carlos Leandro Delgado

doi:10.17230//ecos.2020.50.2

Cited by 2 publications

(4 citation statements)

References 68 publications

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“…Paltrinieri, et al (2021) not found some relationship between income diversification and stability for both conventional and Islamic banks. Finally, Muñoz, et al (2020) showed that income diversification had a positive and non-linear effect on the banks´ performance. The non-linear link suggests that the positive effect is reversed if the banking industry is highly diversified.…”

Section: Theoretical Frameworkmentioning

confidence: 97%

“…To stablish if the assets, liabilities, and / or income diversification distresses or benefits Mexican banks on its profitability and /or risk, we partially replicated the methodological footsteps of Muñoz, et al (2020). Their mentioned research analysis showed that diversification has a positive and nonlinear effect on bank performance.…”

Section: Study Hypothesismentioning

confidence: 98%

“…Furthermore, due to a greater degree of financial liberalization throughout the world and access to the internet telecommunication tools, the banking industry has experienced significant changes throughout the world (Ghosn, 2019;Muñoz, et al, 2020). This financial liberalization and the internet telecommunications tools have had a significant impact on its performance (Shim, 2019;Verlekar, 2019); therefore, the interest to revisit the topic, now from the Mexican perspective, to evaluate their effect over profitability, and/or its risk.…”

Section: Introductionmentioning

confidence: 99%

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Asset Specialization as a Long-Term Strategy for Banks in Mexico

Reynoso

Vela-Beltrán-del-Río

2022

REMEF

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Our objective is to establish whether the level of assets, liabilities, and income diversification of the Mexican banks is related to their profitability and risk levels. Using the financial information of the 15 key banks, between 2010 and 2021, along with the Herfindahl-Hirschman Index and a series of polynomial regression analyzes, we calculated the diversification level of each bank. We also computed a series of inflection points suggesting that Mexican banks need to adopt an asset specialization long-term strategy, but to a point because a radical transformation would be detrimental to both return and risk. Similarly, we do not recommend venturing into a radical income diversification strategy, for the same reason. On the other hand, the liability diversification strategy is difficult to apply for achieving the mentioned objectives. Furthermore, we would like to emphasize that our analysis takes into consideration the high presence of foreign banking affiliates in Mexico.

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Section: Theoretical Frameworkmentioning

confidence: 97%

Section: Study Hypothesismentioning

confidence: 98%

Section: Introductionmentioning

confidence: 99%

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Asset Specialization as a Long-Term Strategy for Banks in Mexico

Reynoso

Vela-Beltrán-del-Río

2022

REMEF

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“…The financial intermediation theory was initiated from the exertion of Mendoza, Yelpo, Velso Ramos and Fuentealba (2020). Financial intermediation is a procedure that comprises additional units putting coffers with monetary institutions who then lend to shortfall units, (Bandyopadhyay, 2021).…”

Section: Financial Intermediation Theorymentioning

confidence: 99%

Effect of Credit Risk Management on Financial Performance of Commercial Banks in Kenya

YAA,

MWANZIA (PhD)

2022

strategicjournals.com

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The overall goal of the research was to establish effect of credit risk management on financial performance of commercial banks in Mombasa County. Credit risk has always been a concern not only to bankers but also to the entire business world because of the dangers or risks business partners may be exposed as a result of a failure by trading partners to meet their obligations on due date. The study adopted a descriptive survey designs because it provided a clear outcome and the characteristics associated with it at a specific point in time. The target population was all the 38 commercial banks in Kenya that were operational. The study made use of secondary data, which was obtained from the financial statements of commercial banks in Kenya and from Central Bank of Kenya's bank supervision reports. The study made use of a data extraction tool to collect secondary data. In the analysis of data, the study used both inferential and descriptive statistics and all statistical analysis were carried out using STATA version 14. Descriptive statistics comprised of frequency distributions, percentages, mean, variances and standard deviation. On the other hand, inferential statistics was carried out using regression analysis, which was either fixed effect or random effects depending on the results from Hausman test. The study found that concentration risk management has a significant effect on the financial performance of commercial banks in Kenya. The study also found that liquidity risk management has a significant effect on financial performance of commercial banks in Kenya. The study revealed that default risk has a negative and significant effect on the financial performance of commercial banks in Kenya. The study further established that institutional risk management has a significant effect on financial performance of commercial banks in Kenya. The study concluded that the management of commercial banks in Kenya should focus on the reduction of the average collection period. In addition, commercial banks in Kenya should focus on the management of liquidity risk so as to improve the financial performance of commercial banks in Kenya. Liquidity risk can also be managed by improving risk reporting abilities, improving company cash flow management, improving balance sheet management and also by improving risk metrics and monitoring processes. Further, the management of commercial banks in Kenya should focus on reducing non-performing loans by improving credit appraisal process and by improving institutional credit policy. Also, the management of commercial banks in Kenya should focus on improving capital adequacy by developing strategies to increase income and reduce inventory and cost of service delivery.

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Are the effects of market concentration and income diversification on banking performance persistent?

Cited by 2 publications

References 68 publications

Asset Specialization as a Long-Term Strategy for Banks in Mexico

Asset Specialization as a Long-Term Strategy for Banks in Mexico

Effect of Credit Risk Management on Financial Performance of Commercial Banks in Kenya

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