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Does bank diversification heterogeneously affect performance and risk-taking in ASEAN emerging economies?

Syed Moudud-Ul-Huq, Badar Nadeem Ashraf, Anupam Das Gupta and Changjun Zheng

Research in International Business and Finance, 2018, vol. 46, issue C, 342-362

Abstract: In this study, we contribute to the ongoing debate on the costs and benefits of bank diversification. Diversification may benefit banks if diversified activities are inherently less risky or yield a high return, while it may hurt banks if diversified activities are more dangerous or possess low return. Using bank-level data from Indonesia, Malaysia, the Philippines, Thailand, and Vietnam over the period 2011–2015, we find that overall banks benefit from diversification; that is, the diversified banks have higher performance and lower risk. However, we further observe that diversified activities heterogeneously benefit banks. While the revenue diversification has a robust positive impact on bank performance and stability, the effect of assets diversification varies from country-to-country. Our results imply that banks can prioritize activities for diversification to maximize the benefits.

Keywords: Income diversification; Assets diversification; Performance; Risk; Emerging economies; ASEAN (search for similar items in EconPapers)
JEL-codes: C2 G11 G21 G28 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.ribaf.2018.04.007

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