Small European banks: benefits from diversification?

Mercieca, Steve, Schaeck, Klaus and Wolfe, Simon (2007) Small European banks: benefits from diversification? Journal of Banking and Finance, 31, (7), pp. 1975-1998. (doi:10.1016/j.jbankfin.2007.01.004).


Full text not available from this repository.


Motivated by the liberalisation and harmonisation of financial systems in Europe, we investigate whether the observed shift into non-interest income activities improves performance of small European credit institutions. Using a sample of 755 small banks for the period 1997–2003, we find no direct diversification benefits within and across business lines and an inverse association between non-interest income and bank performance. Our findings are robust to a set of sensitivity analyses using alternative samples and controlling for the regulatory environment. Furthermore, the results provide circumstantial evidence for the presence of economies of scale. The absence of benefits of diversification confirms findings for other banking markets and suggests small European banks enter lines of business where they currently lack expertise and experience. These results have implications for bank supervisors, regulators and bank managers

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/j.jbankfin.2007.01.004
ISSNs: 0378-4266 (print)
Keywords: small banks, product diversification, risk/return performance
ePrint ID: 45887
Date :
Date Event
July 2007Published
Date Deposited: 20 Apr 2007
Last Modified: 16 Apr 2017 18:40
Further Information:Google Scholar

Actions (login required)

View Item View Item