The Impact of Income Diversification on Chinese Banks: Bank Performance

2020 ◽  
pp. 53-88
Author(s):  
Zhixian Qu
Keyword(s):  
Bank Performance ◽  
Income Diversification ◽  
Chinese Banks ◽  
The Impact

Income diversification and bank performance: evidence from BRICS nations

2018 ◽  
Vol 67 (9) ◽  
pp. 1625-1639 ◽  
Author(s):  
Shweta Sharma ◽  
Anand Anand
Keyword(s):  
Generalized Method Of Moments ◽  
Structural Response ◽  
Bank Performance ◽  
Income Diversification ◽  
Diversification Discount ◽  
Data Set ◽  
Content Type ◽  
Brics Countries ◽  
And Performance ◽  
The Impact

PurposeThe purpose of this paper is to examine the impact of income diversification on bank performance in BRICS countries as a structural response to concentration risk. The authors argue that effectiveness of this approach is conditional upon its extent and quality. To understand the role of firm-specific characteristics on effectiveness of diversification, the authors examine this relationship across asset sizes.Design/methodology/approachAn unbalanced panel data set of 169 BRICS banks is sampled over the period 2001–2015. Fixed effect models and system generalized method of moments techniques are used to test the relationship between diversification and bank performance using alternate measures.FindingsResults indicate a positive relationship between diversification and performance measured in terms of bank risk and returns for medium and large size banks. However, for small banks this relationship is negative suggesting a “diversification discount.”Originality/valueThe study indicates that diversification as a risk mitigating tool can be effective but the managers and regulators should not emphasize on the “one-size-fits-all” approach for all banks. Policy frameworks for controlling concentration risk should be developed keeping in mind factors like bank size, customer base and financial leverage which brings variations to the risk profile of banks.

scholarly journals Human capital, income diversification and bank performance–an empirical study of East African banks

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peter Nderitu Githaiga
Keyword(s):  
Human Capital ◽  
East Africa ◽  
Control Variable ◽  
Bank Performance ◽  
Income Diversification ◽  
Content Type ◽  
Bank Managers ◽  
The Impact ◽  
The Relationship ◽  
Positive Effect

PurposeThe purpose of this paper is to examine whether income diversification moderates the relationship between human capital and bank performance.Design/methodology/approachThe study uses a sample of 53 banks and panel data for the years 2010–2018. The hypotheses are tested through hierarchical multiple regression and the choice between fixed effect and random effect estimation is based on the results of the Hausman test.FindingsThe study finds that human capital and income diversification significantly influence bank performance; however, the direction of the causality varies. While human capital has a positive effect, income diversification has a negative effect. Additionally, the interaction term has a negative and significant effect on bank performance, inferring that income diversification has an antagonistic effect on the human capital and bank performance relationship. For the control variable, liquidity and asset quality negatively affects bank performance while capitalization has a positive effect.Research limitations/implicationsHuman capital was measured as human capital efficiency (HCE), which is a quantitative measure of human capital, hence future studies can use qualitative measures. Also, the study focused on commercial banks in East Africa, future researcher may possibly consider other regions and industries, which would shed more insights.Practical implicationsThe results of this paper provide valuable insights. Bank managers can get a better understanding of the impact of human capital on bank performance, and the need to invest more in human capital development. Further, the study cautions bank managers that engaging in non-lending activities might destroy the economic value of human capital and ultimately lower performance. The study also recommends that policymakers should address the obstacles to banks' income diversification, for instance relaxing regulations restricting diversification; this might enable banks to leverage related financial service activities for optimal utilization of human capital and improve banks' profitability.Originality/valueWhile a good number of previous studies investigated the direct effect of human capital and income diversification on the performance of banks, this study examines the moderating role of income diversification on the relationship between human capital and performance of banks in East Africa.

Australian Specific Bank Features and the Impact of Income Diversification on Bank Performance and Risk

2015 ◽  
Vol 54 (2) ◽  
pp. 63-87 ◽  
Author(s):  
Piyadasa Edirisuriya ◽  
Abeyratna Gunasekarage ◽  
Michael Dempsey
Keyword(s):  
Bank Performance ◽  
Income Diversification ◽  
The Impact

Income Diversification and Bank Efficiency in Vietnam

2017 ◽  
pp. 52-67
Author(s):  
Sang Nguyen Minh
Keyword(s):  
Regression Model ◽  
Commercial Banks ◽  
Banking System ◽  
Operational Efficiency ◽  
Commercial Banking ◽  
Tobit Regression ◽  
Income Diversification ◽  
Positive Effects ◽  
Study Results ◽  
The Impact

This study uses the DEA (Data Envelopment Analysis) method to estimate the technical efficiency index of 34 Vietnamese commercial banks in the period 2007-2015, and then it analyzes the impact of income diversification on the operational efficiency of Vietnamese commercial banks through a censored regression model - the Tobit regression model. Research results indicate that income diversification has positive effects on the operational efficiency of Vietnamese commercial banks in the research period. Based on study results, in this research some recommendations forpolicy are given to enhance the operational efficiency of Vietnam’s commercial banking system.

What Drives Banking Profitability During Financial Crisis and Political Turmoil? Evidence from the MENA Region

2021 ◽  
pp. 097491012110311
Author(s):  
Salma Zaiane ◽  
Fatma Ben Moussa
Keyword(s):  
Financial Crisis ◽  
Political Instability ◽  
Generalized Method Of Moments ◽  
Bank Performance ◽  
Net Income ◽  
Mena Region ◽  
Factors Affecting ◽  
Mena Countries ◽  
Conventional Banks ◽  
The Impact

The purpose of the study is to identify bank specific, macroeconomic, and stability determinants of both conventional and Islamic bank performance. We also try to identify evidence on the impact of financial crisis and political instability during the Arab Spring (AS) period. The study covers a sample of 123 banks (34 Islamic banks and 89 conventional banks from 13 Middle East and North Africa [MENA] countries) over the period 2000–2013. We use different proxies of performance as dependent variables: return on asset (ROA), return on equity (ROE), net income margin (NIM), and estimate several regressions using the dynamic generalized method of moments. Our results reveal that bank size, asset quality, specialization, and diversification are the major bank specific factors affecting performance of Islamic and conventional banks. Besides, macroeconomic indicators (GDP and inflation) and regulatory quality influence both types of banks differently. Finally, both the financial crisis and political instability negatively affect bank performance.

scholarly journals Does the target market affect bank performance? Evidence from the geographic diversification of city commercial banks in China

2021 ◽  
Vol 15 (1) ◽  
Author(s):  
Xiaonan Li ◽  
Chang Song
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Capital Adequacy ◽  
Bank Performance ◽  
Chinese Government ◽  
Target Market ◽  
Geographic Diversification ◽  
Cross Sectional ◽  
The Impact ◽  
Geographical Diversification

AbstractAfter the opening up of the banking sector to domestic and foreign capitals which is approved by the Chinese government, the China Banking Regulatory Commission (CBRC) has permitted city commercial banks to diversify geographically. Since this deregulation in 2006, city commercial banks began to geographically diversify to occupy the market and acquire more financial resources. To examine the causal relationship between geographical diversification and bank performance, we construct an exogenous geographical diversification instrument using the gravity-deregulation model and a policy shock. We find that bank geographical diversification negatively affects bank performance. Moreover, we conduct some mechanism tests in the Chinese context. We find that the target market with several large- and medium-sized banks and a high level of local protectionism in the target market decreases the performance of city commercial banks. Finally, cross-sectional analyses show that the impact of geographical diversification on banks’ performance is more notable among city commercial banks that are younger, and have a lower capital adequacy ratio and a higher non-performing loan ratio.

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