Toward a More Resilient Financial System: Should Banks Be Diversified?

Laura Baselga-Pascual, Olga Del Orden-Olasagasti and Antonio Trujillo-Ponce
Additional contact information
Laura Baselga-Pascual: Department of Finance and Accounting, University of Deusto, Mundaitz Kalea, 50, 20012 Donostia, Spain
Olga Del Orden-Olasagasti: Department of Finance and Accounting, University of Deusto, Mundaitz Kalea, 50, 20012 Donostia, Spain

Sustainability, 2018, vol. 10, issue 6, 1-16

Abstract: This article empirically analyzes the effects of revenue diversification on the profitability and risk of a large sample of Eurozone banks over the period from 2000 to 2012. We use the generalized method of moments (GMM) estimator, which is also referred to as the system-GMM estimator. We conclude that higher income diversification favors bank profitability. However, our study does not find a significant relationship between revenue diversification and bank risk, even when considering a crisis period. Our results suggest that establishing restrictions in the universal banking model could damage the resilience of the financial system, and thus affect the sustainability of the uneven economic recovery in Europe.

Keywords: diversification; bank profitability; bank risk; dynamic panel; European banking system; sustainability of economic recovery (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.mdpi.com/2071-1050/10/6/1903/pdf (application/pdf)
https://www.mdpi.com/2071-1050/10/6/1903/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:6:p:1903-:d:151129

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().