The Anatomy of Bank Diversification

Elsas, Ralf; Hackethal, Andreas; Holzhäuser, Markus

doi:10.2139/ssrn.968214

Cited by 114 publications

(174 citation statements)

References 39 publications

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“…The activity diversification for all regressions shows a significant negative impact on performance and a positive significant effect on the financing mean (at the 1% level). The negative effect of diversification on performance is in line with the finding of Elsas, Hackethal, and Holzhäuser (). This finding may be explained by their engagement in several financial services of loan and other.…”

Section: Resultssupporting

confidence: 88%

Diversification, capital structure, and performance: A simultaneous equation approach

Jouida

Hellara

2017

Manage Decis Econ

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This paper examines the relationships between diversification, capital structure, and performance jointly on the financial sector. Our dataset covers 412 French financial institutions over the period ranging from 2002 to 2012. Furthermore, we use a three‐stage least squares to check reverse causality. Our three‐stage least squares results show positive significant simultaneous interdependencies between performance and leverage. Performance reduction and debt levels increase are associated with activity diversification. Performance and leverage reduction is due to geographic diversification. Our estimation confirms reverse association between the interaction of diversification, leverage, and performance. Moreover, the findings are robust after taking into account alternative measures of diversification.

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Section: Resultssupporting

confidence: 88%

Diversification, capital structure, and performance: A simultaneous equation approach

Jouida

Hellara

2017

Manage Decis Econ

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“…Demirgüç‐Kunt and Huizinga (), Stiroh (), and ECB () found that greater reliance on non‐interest income is associated with weaker bank profitability. The converse has been found by Dietrich and Wanzenried () in the case of Swiss banks and by Elsas, Hackethal, and Holzhäuser () who argue that non‐interest businesses yield higher margins and thus enhance profitability. Related to lending and diversification, Roengpitya, Tarashev, and Tsatsaronis () identify three different business models by classifying balance sheet compositions and find that profitability and efficiency vary markedly across business models and over time.…”

Section: Literature Reviewmentioning

confidence: 82%

Bank profitability and risk‐taking under low interest rates

2017

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The aim of this paper is to investigate the impact of the unusually low interest rate environment on the soundness of the United States banking sector in terms of profitability and risk-taking. Using both dynamic and static modelling approaches and various estimation techniques, we find that the low interest rate environment indeed impairs bank performance and compresses net interest margins. Nonetheless, banks have been able to maintain their overall level of profits, due to lower provisioning, which in turn may endanger financial stability. Banks did not compensate for their lower interest income by expanding operations to include trading activities with a higher risk exposure.

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“…We use the most comprehensive indicators, given our dataset. Following Elsas et al () and Curi et al (), we use an adjusted Herfindahl–Hirshman index (HHI) to construct three measures of asset, fund, and income diversification. We define diversification ( DIV ) by subtracting HHI from unity, so that it increases with diversification.…”

Section: Methodology and Datamentioning

confidence: 99%

Does Bank Diversification Improve Output Growth? Evidence from the Recent Global Crisis

Mirzaei

Kutan

2016

Int Rev Finance

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This study examines whether the diversity of activities conducted by the banking sector in the years approaching the recent global financial crisis alleviated the adverse impact of the crisis. Using data for 28 industries in 66 countries, we find that bank diversification has strengthened country resilience to the crisis, as measured by industry growth over the period 2008–2009. However, we find that while both bank‐based and market‐based economies have been affected negatively by the crisis, the contribution of bank diversification in mitigating the real impact of the crisis is pronounced only in bank‐based economies. Overall, our findings suggest that countries with significant bank diversification have also been the most resilient to the recent global crisis.

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The Anatomy of Bank Diversification

Abstract: Abstract:We use panel data from nine countries over the period 1996 to 2003 Of course, all errors are ours.

Cited by 114 publications

References 39 publications

Diversification, capital structure, and performance: A simultaneous equation approach

Diversification, capital structure, and performance: A simultaneous equation approach

Bank profitability and risk‐taking under low interest rates

Does Bank Diversification Improve Output Growth? Evidence from the Recent Global Crisis

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