Asymmetric effects of households’ financial participation on banking diversification

Pei-Fen Chen and Jhih-Hong Zeng

Journal of Financial Stability, 2014, vol. 13, issue C, 18-29

Abstract: This paper examines banks’ diversification–performance nexus from the perspective of demand, the magnitude of households’ financial participation, with bank data from 22 European countries over the period from 2002 to 2009. We argue that the magnitude of households’ financial participation develops asymmetric diversification effects on banks’ performance. The empirical investigation herein provides evidence for the asymmetric influence of households’ financial participation on the effect of banks’ income diversification on their performance. Our findings suggest that banks should take into account the deposit interest rates and the variety of households’ investment habits when they operate toward diversification.

Keywords: Financial participation; Income diversification; Bank performance; Financial investment rate; Trading frequency (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:13:y:2014:i:c:p:18-29

DOI: 10.1016/j.jfs.2014.02.001

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