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Diversification, efficiency and risk of banks: Evidence from emerging economies
Journal article   Peer reviewed

Diversification, efficiency and risk of banks: Evidence from emerging economies

Ji Wu, Limei Chen, Minghua Chen and Bang Nam Jeon
Emerging markets review, v 45, 100720
Dec 2020
DOI: https://doi.org/10.1016/j.ememar.2020.100720
Featured in Collection :   UN Sustainable Development Goals @ Drexel

Abstract

Bank risk Diversification Efficiency Emerging economies
This paper examines the impact of business diversification of banks on their risk, with efficiency taken into consideration as a conduit. Using bank-level data from more than 1000 commercial banks in 39 emerging economies during the period of 2000–2016, we find that increased business diversification exerts two competing effects on bank risk. The direct effect of increased diversification bolsters the stability of banks, but it is offset by the indirect effect whereby lowered efficiency, which is resulted from higher diversification, increases the riskiness of banks. Thus, the overall benefits from bank business diversification on bank stability rely on the trade-off of the two competing forces. •We examine the impact of diversification of banks on their risk.•Efficiency is a conduit between the diversification and risk of banks.•We use bank-level data from 39 emerging economies during 2000–2016.•Increased diversification exerts two competing effects on bank risk.

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23 Record Views
35 citations in Web of Science
35 citations in Scopus

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UN Sustainable Development Goals (SDGs)

This publication has contributed to the advancement of the following goals:

#1 No Poverty
#10 Reduced Inequalities
#8 Decent Work and Economic Growth
#9 Industry, Innovation and Infrastructure

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Collaboration types
Domestic collaboration
International collaboration
Web of Science research areas
Business, Finance
Economics
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