Can banks in emerging economies benefit from revenue diversification?


Sanya, Sarah and Wolfe, Simon (2011) Can banks in emerging economies benefit from revenue diversification? Journal of Financial Services Research, 40, (1-2), 79-101. (doi:10.1007/s10693-010-0098-z).

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Description/Abstract

This paper investigates the effect of revenue diversification on bank performance and risk. Using a panel dataset of 226 listed banks across 11 emerging economies and a new methodological approach, System Generalized Method of Moments estimators (System GMM), the results in this paper provide empirical evidence of the impact of the observed shift towards non-interest income generating activities on insolvency risk and bank performance. The core finding is that diversification across and within both interest and non-interest income generating activities decrease insolvency risk and enhance profitability. The results also show that these benefits are largest for banks with moderate risk exposures. By extension, these results have significant strategic implications for bank managers, regulators and supervisors who share a common interest in boosting bank performance and stability.

Item Type: Article
ISSNs: 0920-8550 (print)
1573-0735 (electronic)
Keywords: emerging economies, revenue diversification, banks, insolvency risk
Subjects: H Social Sciences > HG Finance
Divisions: University Structure - Pre August 2011 > School of Management
Faculty of Business and Law > Southampton Law School
ePrint ID: 185249
Date Deposited: 10 May 2011 09:02
Last Modified: 27 Mar 2014 19:40
URI: http://eprints.soton.ac.uk/id/eprint/185249

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