Commercial bank mutual fund activities: Implications for bank risk and profitability

Gallo, John G.; Apilado, Vincent P.; Kolari, James W.

doi:10.1016/s0378-4266(96)00024-6

Cited by 124 publications

(74 citation statements)

References 17 publications

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“…In addition, since the non-interest business of a bank is irrelevant or not completely relevant to the interest business (which was believed to be more highly related to the economy), the diversification of income structures can reduce the volatility of the bank's income and stabilize it. Furthermore, by making full use of the customer information accumulated in traditional businesses, universal banks that adopt income diversification incur lower costs than specialized banks engaged only in traditional banking (see [2][3][4][5]). Moreover, some scholars believe that universal banks achieve well-diversified incomes and face lower risks than specialized banks.…”

Section: The Income Diversification Of Banksmentioning

confidence: 99%

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Does Income Diversification Benefit the Sustainable Development of Chinese Listed Banks? Analysis Based on Entropy and the Herfindahl–Hirschman Index

Jiang

Han

2018

Entropy

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Abstract:We collected data pertaining to Chinese listed commercial banks from 2008 to 2016 and found that the competition between banks is becoming increasingly fierce. Commercial banks have actively carried out diversification strategies for greater returns, and the financial reports show that profits are increasingly coming from the non-interest income benefits of diversification strategies. However, diversification comes with risk. We built a panel threshold model and investigated the effect of income diversification on a bank's profitability and risk. Diversification was first measured by the Herfindahl-Hirschman index (HHI), and the results show that there is a nonlinear relationship between diversification and profitability or risk does exist. We introduced an interesting index based on the entropy to test the robustness of our model and found that a threshold effect exists in both our models, which is statistically significant. We believe the combination of the entropy index (ENTI) and the HHI enables more efficient study of the relationship between diversification and profitability or risk more efficiently. Bankers and their customers have increasingly been interested in income diversification, and they value risk as well. We suggest that banks of different sizes should adopt the corresponding diversification strategy to achieve sustainable development.

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Section: The Income Diversification Of Banksmentioning

confidence: 99%

“…In Models 7-9, the diversification index is measured based on the Herfindahl-Hirschman index (HHI). 2 In Models 10-12, the diversification index is measured by entropy index (ENTI). 3 Note that we use the total loans as a measure of the bank size based on the prior literature for robustness analysis.…”

Section: Robustness Analysismentioning

confidence: 99%

Does Income Diversification Benefit the Sustainable Development of Chinese Listed Banks? Analysis Based on Entropy and the Herfindahl–Hirschman Index

Jiang

Han

2018

Entropy

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“…For examples, Gallo, Apilado and Kolari [32] shows that a combination of traditional banking and mutual fund activities can improve profitability and steadiness of U.S bank holding enterprises due to its low interest rate level, the Federal Reserve Board"s opening regulation and its extra sales commissions and fee incomes. Nevertheless, the study also reports that those activities can only help banks to lower financial-services industry risk but have no significant influence on bank market risk and unsystematic risk.…”

Section: A Revenue Diversification and Financial Fragility Of Banksmentioning

confidence: 99%

Financial Fragility of Banks In Vietnam: The Role of Revenue Diversification and National Governance Quality

2018

EEHSS-18 June 10-11, 2018 Ho Chi Minh City (Vietnam)

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Abstract-This paper investigates the effects of revenue diversification and national governance quality on the financial fragility of 31 commercial banks in Vietnam over the period 2005 -2016. By using an unbalanced panel data and employing GMM estimator, this study"s empirical findings show that an increase in revenue diversification is associated with a rise in bank financial fragility. Meanwhile, a higher in national governance quality drives to lower in financial fragility of Vietnam banks. This study analyses further from the interaction between diversification and national governance quality indicators show that most indicators of Vietnam governance quality tend to play an important role in relationship between diversification and bank financial fragility.

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“…A good strand of literature on bank governance and regulation can be broadly analysed under two strands; first, exploring the unsystematic risk because of the internal variables as its potential determinants (Brewer et al, 1996;Gallo et al, 1996;Berger and DeYoung, 1997;Angbazo, 1997) and; the second, surveying the systematic risk due to the negative externalities in the financial markets, regulations and macro-economic conditions (Demirgunc-Kunt, 1989;Hassan et al, 1994).…”

Section: Related Literaturementioning

confidence: 99%

Bank Regulation, Supervision and Efficiency During the Global Financial Crisis

Swamy

2014

SSRN Journal

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In this study, using the World Bank's Bank Regulation and Supervision Survey (BRSS) data, we draw insights about the bank regulatory/supervisory styles, illustrate the differences in regulation/supervision among crisis, non-crisis and BRICS countries, and highlight the ways in which bank regulation and supervision has changed during the crisis period. The study suggests that crisis-countries had weaker regulatory and supervisory frameworks compared to those in emerging countries during the crisis. BRICS countries as a distinct block has demonstrated uniqueness in the regulatory/supervisory styles which is neither similar to crisis-countries nor with the non-crisis countries.

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Commercial bank mutual fund activities: Implications for bank risk and profitability

Cited by 124 publications

References 17 publications

Does Income Diversification Benefit the Sustainable Development of Chinese Listed Banks? Analysis Based on Entropy and the Herfindahl–Hirschman Index

Does Income Diversification Benefit the Sustainable Development of Chinese Listed Banks? Analysis Based on Entropy and the Herfindahl–Hirschman Index

Financial Fragility of Banks In Vietnam: The Role of Revenue Diversification and National Governance Quality

Bank Regulation, Supervision and Efficiency During the Global Financial Crisis

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