Can banks in emerging economies benefit from revenue diversification?
Can banks in emerging economies benefit from revenue diversification?
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.
emerging economies, revenue diversification, banks, insolvency risk
79-101
Sanya, Sarah
0306da52-e3fa-47b6-b735-c751f3da78b7
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
October 2011
Sanya, Sarah
0306da52-e3fa-47b6-b735-c751f3da78b7
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Sanya, Sarah and Wolfe, Simon
(2011)
Can banks in emerging economies benefit from revenue diversification?
Journal of Financial Services Research, 40 (1-2), .
(doi:10.1007/s10693-010-0098-z).
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.
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Published date: October 2011
Keywords:
emerging economies, revenue diversification, banks, insolvency risk
Organisations:
Southampton Law School, Management
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Local EPrints ID: 185249
URI: http://eprints.soton.ac.uk/id/eprint/185249
ISSN: 0920-8550
PURE UUID: 9be29e78-d62a-46b1-babd-1b04d11323e3
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Date deposited: 10 May 2011 09:02
Last modified: 15 Mar 2024 02:45
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Author:
Sarah Sanya
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