The relationship between revenue diversification and bank performance: Do financial structures and financial reforms matter?

Chien-Chiang Lee (), Meng-Fen Hsieh and Shih-Jui Yang

Japan and the World Economy, 2014, vol. 29, issue C, 18-35

Abstract: This paper contributes to the existing literature by investigating the impact of revenue diversification on bank performance through a broad array of financial reforms, including credit controls, interest rate controls, entry barriers, banking supervision, privatization, and financial account restrictions. This analysis is the first to investigate whether financial structures (bank- or market-based systems) change the effect of diversification on individual bank performance. We use a panel dataset sample from 29 Asia-Pacific countries covering the period between 1995 and 2009, for a total of 2372 banks. Unlike the results of previous studies based on data from the U.S. and Europe, this study confirms the hypothesis of the portfolio diversification effect for the Asia-Pacific banking industry. For bank-based groups, bank performance can be improved through diversification, supporting the “bank-based view” hypothesis. Finally, under different financial systems, the relationships among revenue diversity, financial reforms, and bank performances are multidimensional.

Keywords: Bank- or market-based systems; Financial reforms; Revenue diversification; Banking performance; Regulation (search for similar items in EconPapers)
JEL-codes: G21 G28 O16 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:29:y:2014:i:c:p:18-35

DOI: 10.1016/j.japwor.2013.11.002

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