Dynamics of income diversification and bank performance in India

Vidyarthi, Harishankar

doi:10.1108/jfep-05-2019-0084

Cited by 13 publications

(10 citation statements)

References 126 publications

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“…Moreover, to date, empirical research has concentrated on a specific country, mainly the banking system of the USA (Berger, 1995;Teixeira et al, 2020) and the banking systems in other developed countries such as the UK (Valverde and Fern andez, 2007), Finland (Huhtilainen, 2020) and Italy (Barra and Zotti, 2019). Fewer studies have looked at bank performance in developing economies such as China (Lee and Lee, 2019;Liu et al, 2019), India (Vidyarthi, 2019), Pakistan (Ali and Puah, 2019;, Ghana (Duho et al, 2020) and Malaysia (Ibrahim, 2020;Indrawan and Rahman, 2020). Because of different model specifications and stages of economic development of the countries concerned, there is wide variation in the results, including attributed causality, among these studies.…”

Section: Related Literaturementioning

confidence: 99%

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Saif‐Alyousfi

Saha

2021

IMEFM

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Purpose This paper aims to examine the effect of bank-specific, financial structure and macroeconomic factors on the risk-taking behavior, stability and profitability of banks in Gulf Cooperation Council (GCC) economies during 1998–2017. Design/methodology/approach The authors use a two-step system generalized method of moments dynamic model to analyze the data. Findings The results show that non-traditional activities increase the risk and decrease the stability and profitability of banks that are highly capitalized, highly liquid and large. Banks in this group are less engaged in securities investments and their higher degree of loan exposure leads to a decrease in risk and an increase in their stability and profitability. Higher concentration increases the risk and decreases the stability and profitability of banks that are less capitalized, less liquid and small. Banks with a higher share of non-traditional activities are riskier and less stable and less profitable before the financial crisis. The study finds that banks with relatively higher capitalization and high lending growth rates are riskier, profitable and less stable during the crisis. Larger commercial banks are less risky and more stable and profitable than smaller banks before the global financial crisis. Islamic banks performed better in terms of fee income, capitalization, liquidity, asset quality and have higher market concentration than conventional banks. Originality/value The study provides the first comprehensive empirical evidence on the drivers of risk-taking behavior, stability and profitability of the GCC banks. It also investigates the differences across these variables based on the characteristics of financial strength such as capitalization, liquidity and size; before, during and after the financial crisis; and differences between Islamic and conventional banks.

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Section: Related Literaturementioning

confidence: 99%

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Saif‐Alyousfi

Saha

2021

IMEFM

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“…Moreover, some studies records mixed results given different forms of investment structures of the banks. For instance, there exists a positive (Vidyarthi, 2019 and Amoah, Bokpin, Ohene-Asare & Aboagye 2021), detrimental effects (Luu et al, 2019;Doan et al, 2018) and no significant relationship (Mittal & Nihar, 2018) between income diversification, investment structure and financial performance. Despite the valuable insights by researchers, there still exists a research gap.…”

Section: Statement Of the Problemmentioning

confidence: 99%

“…Moreover, mixed results are available given investment structures informs the forms of ownership the bank will have in relation to income diversification and financial performance linkage. For instance, there exists a positive (Vidyarthi, 2019;Amoah et al, 2021 andTariq et al, 2021), detrimental effects (Luu et al, 2019;Doan et al, 2018) and no significant relationship (Mittal & Nihar, 2018) between income diversification, investment structure and financial performance. Despite the valuable insights by researchers, there still exists a gap.…”

Section: Introductionmentioning

confidence: 99%

Does Investment Structure Matters in the Nexus Between Income Diversification and Financial Performance in Comesa Region? Evidence from Commercial Banks in Kenya

Kiptum

2022

JAREAS

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Purpose: The article examines whether investment structure moderates the relationship between income diversification and financial performance of Commercial banks in COMESA region. Approach/Methodology/Design: The study adopted positivist research paradigm and explanatory research design. The data was collected from 31 commercials banks in Kenya from 2008 to 2019.The study considered the following variables: Income Diversification, Investment Structure and Financial Performance. Modern portfolio theory, Agency theory and resource based view theory were adopted. Findings: The study established that income diversification have positive significant effects on the financial performance. The bank investment structure recorded a negative significant effect on financial performance of the commercial banks. Further, the interaction between investment structure and income diversification presented a negative significant effect on financial performance of the commercial banks. The study adds to debate on diversification premiums and discounts by establishing that investment structure moderates the relationship between income diversification and financial performance. COMESA banks have reasons to diversify their income but should consider the mix of the investment structure to achieve optimum results. Practical Implications: Since the study support the benefits of diversification, COMESA as a region can accelerate on pushing for policies that encourage bank diversification to improve the profitability. Additionally, the diversifying banks should optimally adjust their investment structures to propel diversification benefits to compensate the declining interest income. Originality/value: This study contributes to conflicting diversification premiums and discounts by introducing the moderating role of bank investment structure, this indirect effects adds to modern portfolio theory and agency theory that asserts direct relationship of both diversification premiums and discounts respectively.

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“…In addition to the aforementioned e-banking studies, there are few empirical studies that offer evidence on the performance evaluation of nationalized or government-owned commercial banks from different perspectives. For example, Vidyarthi (2019) examines the relationship between income diversification and firm performance of both private and government-owned commercial banks in India. The author applied tobit regression to analyze the panel data from 38 commercial banks (24 government-owned banks and 14 private commercial banks) listed in the Bombay Stock Exchange, and documented a better performance by private commercial banks than the government-owned commercial banks.…”

Section: Past Studiesmentioning

confidence: 99%

Effects of E-Banking Adoption on the Financial Performance of State-Owned Commercial Banks in Bangladesh

Hossain

2021

Information Resources Management Journal

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This study examines the relationship between e-banking adoption and the financial performance of state-owned commercial banks in Bangladesh. The pooled ordinary least square (OLS) estimate was applied to analyze the panel data of the sample banks. The empirical findings reveal that e-banking adoption and implementation has a significant negative impact on banks' profitability in terms of return on assets, return on equity, and net interest margin in the year of adoption. However, the result also shows that e-banking has a significant positive impact on return on assets in the year following adoption.

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Dynamics of income diversification and bank performance in India

Cited by 13 publications

References 126 publications

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Does Investment Structure Matters in the Nexus Between Income Diversification and Financial Performance in Comesa Region? Evidence from Commercial Banks in Kenya

Effects of E-Banking Adoption on the Financial Performance of State-Owned Commercial Banks in Bangladesh

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