Financial fragility of banks, ownership structure and income diversification: Empirical evidence from the GCC region

Ashraf, Dawood; Ramady, Mohamed A.; Albinali, Khalid

doi:10.1016/j.ribaf.2016.03.010

Cited by 60 publications

(45 citation statements)

References 55 publications

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“…Zhou (2014) concludes that there is no significant relationship between revenue diversification and bank risk. Ashraf et al (2016a), with reference to Gulf Cooperation Council (GCC) region banks, found that banks more involved in fee-based activities are more financially stable compared to banks that mainly generate their incomes only from interest-based activities. Ahamed (2017) concluded that an increased share of non-interest income increases the profitability and risk-adjusted profitability (stability) of Indian banks.…”

Section: H1mentioning

confidence: 99%

The Impact of Revenue Diversification on Bank Profitability and Stability: Empirical Evidence from South Asian Countries

Nisar

Peng

Wang

et al. 2018

IJFS

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This paper is a contribution to the ongoing debate on the benefits and drawbacks of bank revenue diversification. Revenue diversification may benefit banks if diversified activities are inherently less risky and possess high returns, while it may hurt banks if diversified activities are more risky and have low returns. Analyzing a panel dataset of 200 commercial banks from all South Asian countries, we found that overall revenue diversification into non-interest income has a positive impact on the profitability and stability of South Asian commercial banks. We further observed that different types of non-interest income-generating activities have different impacts on bank performance and stability. While fees and commission incomes have a negative impact on the profitability and stability of South Asian commercial banks, other non-interest income has a positive impact. Our results imply that banks can benefit from revenue diversification if they diversify into specific types of non-interest income-generating activities. Our findings are robust and relevant to the use of alternative measures of revenue diversification, profitability and stability.

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Section: H1mentioning

confidence: 99%

The Impact of Revenue Diversification on Bank Profitability and Stability: Empirical Evidence from South Asian Countries

Nisar

Peng

Wang

et al. 2018

IJFS

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“…This paper employs the Z-score which is used by authors to measure risk or financial fragility of banks [6,8,15]. It is an indicator which can estimate the number of standard deviations that a bank"s profit can lead to bankruptcy.…”

Section: A Financial Fragility Measurementmentioning

confidence: 99%

“…By this way, the Z-score are exclusively effected by difference in the level of capital and profitability [6]. It is popularly presented in the existing literature that the Z-score is highly skewed [8,57]. Thus, the authors use the natural logarithm of Z-score in all empirical estimations.…”

Section: A Financial Fragility Measurementmentioning

confidence: 99%

“…Some previous papers show a positive relationship where diversification activities lead to stability for banking systems or reducing potential risks [2][3][4][5]. In contrast, a variety of recent studies find that a greater level of non-traditional activities increases risks or financial fragility for banks [3,[6][7][8][9][10]. However, these authors focus on developed countries in US or Europe.…”

Section: Introductionmentioning

confidence: 99%

“…This paper follows a modeling approach of Ashraf, Ramady and Albinali [8], Moudud-Ul-Huq, Zheng and Gupta [3] and using a sample of 31 domestic commercial banks which are operating in Vietnam during the period 2005 -2016. The authors employ Z-score to gauge the financial fragility of bank as well as the Herfindahl Hirschman Index (HHI) to measure revenue diversification activities.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

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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What drives the banks' diversification decision? A dynamic nonlinear panel data approach

Ammar

Boughrara

2019

Manage Decis Econ

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This paper empirically determines the drivers of functional diversification decision for 365 banks set in selected Middle East and North Africa (MENA) countries over 1988–2015. For this purpose, we use a dynamic nonlinear panel data model. Our findings reveal that both market share and financial intermediation stratify the diversification decision for the whole MENA sample. Splitting the sample shows that the risk‐adjusted profitability and the loan loss provision ratio exert a major influence over the diversification indicator for Gulf Cooperation Council (GCC) banks, whereas the net interest margin ratio, the bank market share, and financial intermediation are the major drivers of the strategic decision for the remaining non‐GCC banks.

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Financial fragility of banks, ownership structure and income diversification: Empirical evidence from the GCC region

Cited by 60 publications

References 55 publications

The Impact of Revenue Diversification on Bank Profitability and Stability: Empirical Evidence from South Asian Countries

The Impact of Revenue Diversification on Bank Profitability and Stability: Empirical Evidence from South Asian Countries

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

What drives the banks' diversification decision? A dynamic nonlinear panel data approach

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