The impact of revenue diversification on bank profitability and risk: evidence from MENA banking industry

Nesrine Ammar and Adel Boughrara

Macroeconomics and Finance in Emerging Market Economies, 2019, vol. 12, issue 1, 36-70

Abstract: The aim of this paper is to investigate the effects of revenue diversification on bank performance while shedding light on the impact of the shift towards non-interest income sources. To this end, we use a sample of 275 banks from fourteen MENA countries over 1990–2011. The model estimation using the GMM system reveals that diversification, when taken as a whole, improves bank profitability. We also split the non-interest income and we find that trading-generating business lines contribute the most to boosting profitability and stability. Engaging in non-interest-related activities worsens the benefit-cost trade-off of diversification, induced by the increased insolvency risk.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:taf:macfem:v:12:y:2019:i:1:p:36-70

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DOI: 10.1080/17520843.2018.1535513

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