Download or read book The Effects of Diversification on Bank Performance from the Perspective of Risk Return and Cost Efficiency written by Begumhan Ozdincer and published by . This book was released on 2011 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: The question of whether banks should diversify or focus in their activities may have different implications for a market where the banking industry is more settled versus a growth market that has not yet fully saturated. The aim of this paper is to investigate whether diversification pays off, in terms of risk return and cost efficiency, in a market which shows a great deal of growth potential.The results of our empirical study can be summarized as follows: banks that are more diversified have higher return measured as return on solvency as well as increased credit risk. The cost income efficiency of more diversified banks is also higher than more focused ones. Our results also show that diversification does not have a significant impact on the market risk of a bank.

Download or read book The Impact of Diversification on Bank Holding Company Performance written by Chinpiao Liu and published by . This book was released on 2009 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank holding companies (BHCs) are hypothesized to achieve potential portfolio and synergistic benefits through various forms of diversification. On the other hand, diversification can generate new managerial problems or agency costs. This dissertation examines five issues. 1) Do all the various forms of diversification have the same favorable/unfavorable effects on BHCs' performance?, 2) Are there any interaction effects among the various types of diversification?, 3) Since the business strategies of large BHCs are different from those of small BHCs, do the diversification effects vary by size?, 4) How did diversification impact BHC performance during the 2007-2008 financial crisis?, and 5) What types of diversification-associated Merger and Acquisitio should BHCs employ to take advantages of diversification benefits? Overall Results - The study finds that not all forms of diversifications have the same impacts on BHCs' performance. Some types of diversification support the hypothesis of favorable portfolio benefits and cost synergies, while other findings support the hypothesis of unfavorable agency costs. Non-interest-income diversification has the strongest favorable impacts on BHCs' performance as it both increases returns and reduces portfolio risk. Security diversification has unfavorable impacts on accounting returns but favorable impacts on market returns. Off-balance-sheet diversification has unfavorable impacts on risk and it does not contribute to BHCs' returns. The largest unfavorable impact is on derivatives losses. Moreover, for some diversification measures, the impacts depend on the scale of their associated activities. When the scale of the diversified activity is large enough, the net diversification impact may change its sign. In general, among the various diversified activities where the sign of the impacts switch with scales, loan diversification switches direction from favorable to unfavorable. BHCs might tend to make increasingly risky loans when their scale of loans expands. Moreover, agency problems might also become difficult to control. On the other hand, security diversification tends to switch the direction of impact from unfavorable to favorable. With larger security portfolios, BHCs are more capable of reducing risk and increasing returns with a wide selection of securities. Results for Various Size Banks - For small banks, larger community banks, and regional BHCs, non-interest-income and loan diversifications generally enhance performance while security portfolio and off-balance sheet diversifications reduce performance. For very large money center banks, diversification into off-balance-sheet activities generates the strongest performance benefit, while domestic geographic, loan and non-interest income diversifications also have favorable impacts. On the other hand, security portfolio diversification has a mix of both favorable and unfavorable effects. Focusing on BHCs with international loan portfolios, off-balance-sheet diversification creates the strongest performance benefits, followed by domestic geographic diversification. On the other hand, international geographic and loan diversifications, along with security portfolio and non-interest income diversifications reduce bank performance. Over all, it appears that larger banks (with the exception of international banks) achieve more favorable diversification benefits. On the other hand, the interaction effects of various forms of diversifications appear to benefit small BHCs the most. Smaller BHCs may not benefit through single channel diversification because doing so likely increases operating costs while the bank remains unable to fulfill their target customers' full range of service needs. However, by multi-channel diversification, the interaction benefits of diversifications can be achieved. On the other hand, larger BHCs can benefit through single channel diversification because they have more market power and are able to enjoy the benefits of diversified portfolios and cost synergies generated through economies of scale. However, multi-channel diversification may make larger BHCs more difficult to manage. For example, they might engage in unfamiliar and risky business where operating and agency costs offset potential portfolio benefits. Overall, diversification generally supports the hypothesis of favorable portfolio benefits and cost synergies. Furthermore, diversification has a consistently more favorable impact during the recent financial crisis. In general, BHCs with widely diversified activities will suffer less than other BHCs with concentrated activities when financial crisis occurs. Impact of Merger Activity - The study also finds that Merger and Acquisition activity associated with several forms of diversification improve BHC performance, while the other forms of diversification have insignificant impacts on performance. The overall implications for BHCs are that not all diversification-driven mergers generate benefits for BHCs. Hence, BHCs should choose the right mergers which meet their business goals.

Download or read book Does Diversification Improve the Performance of German Banks written by Evelyn Hayden and published by . This book was released on 2006 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book New Drivers of Performance in a Changing World written by A. Carretta and published by Springer. This book was released on 2008-11-12 with total page 299 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a financial revolution, new determinants of performance arise and interest in the way performance is measured and communicated to stakeholders grows. This book presents a wide and accurate analysis of the impact that regulation, structural changes and new financial products have on the performance of markets and intermediaries.

Download or read book Bank Size and Systemic Risk written by Mr.Luc Laeven and published by International Monetary Fund. This book was released on 2014-05-08 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The proposed SDN documents the evolution of bank size and activities over the past 20 years. It discusses whether this evolution can be explained by economies of scale or “too big to fail” subsidies. The paper then presents evidence on the extent to which bank size and market-based activities contribute to systemic risk. The paper concludes with policy messages in the area of capital regulation and activity restrictions to reduce the systemic risk posed by large banks. The analysis of the paper complements earlier Fund work, including SDN 13/04 and the recent GFSR chapter on “too big to fail” subsidies, and its policy message is in line with this earlier work.

Download or read book The Belt and Road Strategy in International Business and Administration written by Liu, Wei and published by IGI Global. This book was released on 2019-04-12 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: International business strategies orbit around the idea of strengthening partnerships with other countries. Developing new and innovative opportunities to connect neighboring countries bodes well for those countries and the entire world. The Belt and Road Strategy intends to do just that by strengthening partnerships and constructing a comprehensive and multilevel interconnected network to achieve pluralistic, independent, balanced, and sustainable development. The Belt and Road Strategy in International Business and Administration is a vital collection of information that discusses one of most important programs embodying economic, regional, and political demands in the Asian and European environment. Featuring research on topics such as business development, business law, and multinational enterprise, this book is ideally designed for government officials, professionals, researchers, students, and professors seeking coverage on the theoretical and practical contributions of international business.

Download or read book Bovernance and Bank Valuation written by Gerard Caprio and published by World Bank Publications. This book was released on 2003 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Which public policies and ownership structures enhance the governance of banks? This paper constructs a new database on the ownership of banks internationally and then assesses the ramifications of ownership, shareholder protection laws, and supervisory/regulatory policies on bank valuations. Except in a few countries with very strong shareholder protection laws, banks are not widely held, but rather families or the State tend to control banks. We find that (i) larger cash flow rights by the controlling owner boosts valuations, (ii) stronger shareholder protection laws increase valuations, and (iii) greater cash flow rights mitigate the adverse effects of weak shareholder protection laws on bank valuations. These results are consistent with the views that expropriation of minority shareholders is important internationally, that laws can restrain this expropriation, and concentrated cash flow rights represent an important mechanism for governing banks. Finally, the evidence does not support the view that empowering official supervisory and regulatory agencies will increase the market valuation of banks"--NBER website

Download or read book Effects of US Bank Mergers on Bank Risk and Value written by Ingo Forbriger and published by GRIN Verlag. This book was released on 2007-07 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2006 in the subject Business economics - Investment and Finance, grade: 1,3, Humboldt-University of Berlin (Institut f r Bank- und B rsenwesen), course: Hauptseminar Finanzierung, 20 entries in the bibliography, language: English, abstract: This paper observes the impacts of domestic US commercial bank M&As in the 1990s on individual institutions. It shows potential changes in a bank's risk exposure and how these can affect a merged bank's value. It provides a theoretical consideration as well as a review of empirical studies. The result is that a merger might lead to a risk benefit. In this case, there is, c.p., potential for a value increase. Empirically, risk benefits were either absent or offset by managers' higher risk taking.

Download or read book The Risk and Return Benefits and Basle Accord Regulatory Implications of Bank Functional Diversification written by John Evans and published by . This book was released on 2000 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book On Bank Consolidation in a Currency Union written by Fabio Di Vittorio and published by International Monetary Fund. This book was released on 2018-04-24 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper focuses on the impact of diversification on bank performance and how consolidation through mergers and acquisitions (M&A) affects the banking sector’s stability in the Eastern Caribbean Currency Union (ECCU). The paper finds that a lower level of loan portfolio diversification explains higher non-performing loans and earnings volatility of indigenous banks, as compared to foreign competitors in the ECCU. We then simulate bank mergers both within and across ECCU countries by combining individual banks’ balance sheets. The simulation shows that a typical indigenous bank could better diversify against its idiosyncratic risk by merging with other banks across the border. In addition, we point out that M&A, leading to a more asymmetric banking sector, may increase systemic risk.

Download or read book Diversification Bank Risk and Performance written by Jarrett Emory Kotrozo and published by . This book was released on 2007 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to continue the discussion regarding the diversification of both banking activities and geographical diversification as it relates to performance and risk. Herfindahl indices are used to measure diversification and a number of risk and performance measures are tested including Tobin's q, annualized stock returns and total risk. The results suggest the type of diversification can have varying impacts on both performance and risk. Specifically, banks focused in their revenue activities have higher levels of q than those diversifying their activities. Banks which are more geographically focused, however, have lower annualized stock returns. Banks with an activity focus or those who are geographically diversified also experience higher relative levels of risk. These results have potential implications for bank managers, shareholders and monitors/regulators.

Download or read book Does Diversification Increase Or Decrease Bank Risk and Performance written by and published by . This book was released on 2010 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Bank Performance written by Jacob Bikker and published by Routledge. This book was released on 2008-10-27 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic literature pays a great deal of attention to the performance of banks, expressed in terms of competition, concentration, efficiency, productivity and profitability. This book provides an all-embracing framework for the various existing theories in this area and illustrates these theories with practical applications. Evaluating a broad field of research, the book describes a profit maximizing bank and demonstrates how several widely-used models can be fitted into this framework. The authors also present an overview of the current major trends in banking and relate them to the assumptions of each model, thereby shedding light on the relevance, timeliness and shelf life of the various models. The results include a set of recommendations for a future research agenda. Offering a comprehensive analysis of bank performance, this book is useful for all of those undertaking research, or are interested, in areas such as banking, competition, supervision, monetary policy and financial stability.

Download or read book Diversification and the Banks Risk Return Characteristics written by Andreas Behr and published by . This book was released on 2016 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Banks face a tradeoff between diversifying and focusing their loan portfolio. In this paper we carry out an empirical study for the German market to shed light on the question whether or not the benefits of risk sharing outweigh those of specialization. We use data from the Bundesbank's quarterly borrowers statistic to determine the degree of diversification in the banks' loan portfolios and combine this data with the banks' balance sheets and audit reports. The unique database comprises data from all German banks during the period from 1993 to 2003. Our main results can be summarized in three statements: i) Specialized banks have a slightly higher return than diversified banks. ii) Specialized banks have lower relative loan loss provisions and lower shares of non-performing loans, iii) However, the standard deviations of the loan loss provision ratio and the non-performing loan ratio are lower for diversified banks.

Download or read book Diversification and the Banks Risk Return Characteristics Evidence from Loan Portfolios of German Banks written by Andreas Kamp and published by . This book was released on 2007 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Banks face a tradeoff between diversifying and focusing their loan portfolio. In this paper we carry out an empirical study for the German market to shed light on the question whether or not the benefits of risk sharing outweigh those of specialization. We use data from the Bundesbank's quarterly borrowers statistic to determine the degree of diversification in the banks' loan portfolios and combine this data with the banks' balance sheets and audit reports. The unique database comprises data from all German banks during the period from 1993 to 2003. Our main results can be summarized in three statements: i) Specialized banks have a slightly higher return than diversified banks. ii) Specialized banks have lower relative loan loss provisions and lower shares of non-performing loans. iii) However, the standard deviations of the loan loss provision ratio and the non-performing loan ratio are lower for diversified banks.

Download or read book Safety in Numbers Geographic Diversification and Bank Insolvency Risk written by Joseph P. Hughes and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Riegle-Neal Interstate Banking and Branching Efficiency Act, passed in September 1994 and effective June 1, 1997, will allow nationally chartered banks to branch across state lines. This act will remove impediments to interstate expansion and permit the consolidation of existing interstate networks. What will be the impact of this legislation on bank performance and bank safety? Removing impediments to geographic expansion should improve the risk-return tradeoff faced by most banks. However, this paper argues that economic theory does not tell us whether an improvement in the risk-return tradeoff will lead to a reduction in the volatility of bank returns or in the probability of insolvency. We investigate the role of geographic diversification on bank performance and safety using bank holding company data. We find that an increase in the number of branches lowers insolvency risk and increases efficiency for inefficient bank holding companies; an increase in the number of states in which a bank holding company operates increases insolvency risk but has an insignificant effect on efficiency. Branch expansion raises the risk of insolvency for efficient bank holding companies, while an increase in the number of states has an insignificant effect on insolvency risk. The views expressed in this paper are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System.

Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt: