Stockholder gains from focusing versus diversifying bank mergers

Delong, Gayle

doi:10.1016/s0304-405x(00)00086-6

Cited by 491 publications

(255 citation statements)

References 34 publications

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“…18 In essence, this captures whether a bank has had recent experience in lending to all its top industries, "recent experience" being interpreted as the bank having had a substantial exposure to these industries in the past few years.…”

Section: Test Of Hypothesis H2: Effect Of Focus On Bank Loan Riskmentioning

confidence: 99%

Should Banks be Diversified? Evidence from Individual Bank Loan Portfolios

2002

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We study empirically the effect of focus (specialization) vs. diversification on the return and the risk of banks using data from 105 Italian banks over the period 1993-1999. Specifically, we analyze the tradeoffs between (loan portfolio) focus and diversification using data that is able to identify loan exposures to different industries, and to different sectors, on a bank-by-bank basis. Our results are consistent with a theory that predicts a deterioration in the effectiveness of bank monitoring at high levels of risk and upon lending expansion into newer or competitive industries. Our most important finding is that both industrial and sectoral loan diversification reduce bank return while endogenously producing riskier loans for high risk banks in our sample. For low risk banks, these forms of diversification either produce an inefficient risk-return tradeoff or produce only a marginal improvement. A robust result that emerges from our empirical findings is that diversification of bank assets is not guaranteed to produce superior performance and/or greater safety for banks.JEL Classification: G21, G28, G31, G32

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Section: Test Of Hypothesis H2: Effect Of Focus On Bank Loan Riskmentioning

confidence: 99%

Should Banks be Diversified? Evidence from Individual Bank Loan Portfolios

2002

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“…shows that some highly diversi…ed banks have very high interbank correlation. Figure 2 provides a closer look at this phenomenon by depicting only banks with interbank 14 Excluding the crisis period is warranted to avoid biases arising from calculating correlations in high volatility periods (see e.g. Forbes and Rigobon (2002) …”

Section: De…nitionmentioning

confidence: 99%

The Two Faces of Interbank Correlation

Schaeck,

Silva Buston,

Wagner

2013

SSRN Journal

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We decompose the correlation of bank stock returns into a systemic risk compon- it is important to distinguish between the two sources of interbank correlations when quantifying systemic risk at banks. Our decomposition also permits us to estimate the marginal gains from diversi…cation, which turn out to be rapidly declining with bank size. Since large banks are additionally found to display high levels of the systemic risk component, they are hence predominantly exposed to the undesirable source of interbank correlation.

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“…Le développement de cette théorie est fondé sur les phénomènes de l'aversion des dirigeants au risque, des coûts d'agence, de l'inefficience des opérations, l'inefficacité du contrôle des productivités et des inégalités des pouvoirs sur le marché. Ce résultat rejoint ceux obtenues par plusieurs recherches antérieures (Servaes, 1996;DeLong, 2001;Levine et Laeven, 2007). Berger et al, (2010) ont étudié empiriquement l'impact de la diversification sur la performance des banques commerciales en Chine durant la période 1996-2006.…”

Section: Variables Indépendantesunclassified

Impact de la structure de marché et du choix stratégique sur la performance bancaire : cas des pays émergents

Belkhaoui

Lakhal

Hellara

2012

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Cet article vise à étudier l’effet de la structure de marché et du choix stratégique sur la performance bancaire. La revue de la littérature montre que la structure de marché a un effet positif mais faible sur la performance bancaire. Le choix stratégique des dirigeants pourrait être introduit afin d’expliquer la performance bancaire. Les données on été collectées auprès d’un échantillon de 293 banques commerciales, appartenant à 11 pays émergents, disposant de données sur 7 années successives. Les résultats dégagés permettent de mettre en évidence le rôle du choix stratégique dans l’explication de la performance bancaire. Aussi, les résultats montrent l’absence de relation entre la concentration de marché et la performance bancaire et mettent en évidence l’importance de la part de marché dans l’explication de la performance bancaire.This paper aims to study the effect of market structure and strategic choice on bank performance. The literature review shows that the market structure has a positive but low effect on bank performance. The strategic choice of leaders could be introduced to explain bank performance. The data have been collected from a sample of 293 commercial banks, from 11 emerging countries, with data on 7 successive years. Results highlight the role of strategic choice in the explanation of bank performance. Also, the results show no relationship between market concentration and bank performance and highlight the importance of market share in the explanation of bank performance.Este trabajo tiene como objetivo estudiar el efecto de la estructura del mercado y la elección estratégica sobre el desempeño del banco. La revisión de la literatura muestra que la estructura del mercado tiene un efecto positivo, pero baja en el rendimiento del banco. La elección estratégica de los líderes se podría introducir para explicar el desempeño del banco. Los datos han sido recogidos de una muestra de 293 bancos comerciales, procedentes de 11 países emergentes, con los datos de 7 años sucesivos. Las pérdidas y ganancias cabe destacar el papel de la elección estratégica en la explicación de los resultados de los bancos. Asimismo, los resultados no muestran ninguna relación entre la concentración del mercado y desempeño de los bancos y ponen de relieve la importancia de la cuota de mercado en la explicación del desempeño de los bancos

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Stockholder gains from focusing versus diversifying bank mergers

Cited by 491 publications

References 34 publications

Should Banks be Diversified? Evidence from Individual Bank Loan Portfolios

Should Banks be Diversified? Evidence from Individual Bank Loan Portfolios

The Two Faces of Interbank Correlation

Impact de la structure de marché et du choix stratégique sur la performance bancaire : cas des pays émergents

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