Is Diversification of Bank Income the Bright Side or Dark Side?－A Global Perspective

• Main Authors: Guang-Wei Li, 李洸蔚
• Other Authors: Kun-Li Lin
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/65406788069681701178

碩士 === 逢甲大學 === 財務金融學所 === 98 === This study investigates whether bank income diversification is bright side or dark sight on bank risk. Also, we further to analyze whether country-specific variables affects the impact of relationship between bank income diversification and bank risk. Using a new database covering 900 commercial banks in 95 countries for the period 2001-2008, we find the following findings: The risk measure model result indicates that income diversification for the full sample banks and high-income countries can significantly declines bank volatility of assets, equity returns and reduces the insolvency risk. For medium high-income countries banks, they get the diversification effect to reduce the risk of bank non-performing loans deposited. Medium low-income countries banks which demonstrate the result was increase the insolvency risk, so with the lower income levels, income diversification will be adversely affected. The results show that income diversification for the Eastern Europe banks can significantly reduce the risk of bank non-performing loans deposited, and reduce the insolvency risk. The East Asia banks are showing significant reduction volatility of asset returns. Latin America is showing negative effect, significantly increase the insolvency risk. The country-specific variables model result indicates that higher degree of creditor rights will enhance the bank insolvency risk, diversification has negative effect. However, the lower degree of corruption, better law and order, bureaucracy quality will reduce the bank insolvency risk, income diversification has positive effect.