Does uniqueness in banking matter?

Frank Hong Liu, Lars Norden and Fabrizio Spargoli

Journal of Banking & Finance, 2020, vol. 120, issue C

Abstract: We investigate whether and how the uniqueness of banking activities affects the performance and systemic risk of U.S. banks. We find that banks performing more unique activities exhibit higher profitability and lower risk, controlling for size, diversification, and other key characteristics. We further find that banks’ sensitivity to systemic risk displays an inversely U-shaped relation with activity uniqueness. We interpret the impact of uniqueness in analogy to recent theories showing that systemic diversity promotes financial stability. Our study highlights the role of uniqueness in banking and has important implications for policy makers and banking regulators.

Keywords: Banks; Performance; Systemic risk; Diversification; Diversity (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:120:y:2020:i:c:s037842662030203x

DOI: 10.1016/j.jbankfin.2020.105941

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