Loan Portfolio Diversification, Market Structure and Financial Stability of Banks
Authors
Abstract:
The purpose of this study is to investigate the effect of bank loan portfolio diversification and market structure on the financial stability of banks in the countrychr('39')s capital market. In order to achieve the above goal, the financial data of 17 banks have been used as unbalanced panels in the period from 2005 to 2018. In this study, data analysis was performed using fixed effects models and generalized method of moments (GMM). The results show that diversification and market centralized structure have a positive and significant effect on bankschr('39') financial stability, and the effect of loan diversification on financial stability depends on the level of market concentration. Also, by examining the effect of independent variables on the components of financial stability index, the results show that the diversity of loan portfolio and bank market structure has a positive effect on return on assets and a negative and significant effect on deviation of return on assets. It had a negative effect on the ratio of capital to assets.
similar resources
German Banks ’ Loan Portfolio Composition : Market - orientation vs . Specialisation ?
Theoretical studies of bank existence reveal the importance of informational asymmetries (cf., for example, Diamond (1984)). This might suggest that banks specialise their loan origination in specific industries to exploit information advantages. However, modern portfolio theory, although not directly applicable to banks, as well as the concept of herding behaviour would instead tend to imply t...
full textCooperative Banks and Financial Stability
Cooperative banks are an important, and growing, part of many financial systems. The paper analyzes empirically the role of cooperative banks in financial stability. Contrary to some suggestions in the literature, we find that cooperative banks are more stable than commercial banks. This finding is due to much lower volatility of the cooperative banks’ returns, which more than offsets their low...
full textBubbles, Banks, and Financial Stability
We construct a model of rational bubbles under credit frictions and show that bubbles held by banks can generate large credit expansions followed by financial crisis. The size of boom-bust is somewhat larger than the case in which savers directly hold bubbles. Thus massive credit exansion during booms can be interpreted as an early warning indicator of possible subsequent crisis.
full textDiversification and the banks’ risk-return-characteristics – evidence from loan portfolios of German banks
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 co...
full textFinancial Globalization, Portfolio Diversification, and the Pattern of International Trade
The paper provides a general equilibrium model to show how the incompleteness of international financial markets leads to insufficient industrial specialization and a depressed volume of goods trade. As international portfolio diversification is limited and productivity is uncertain, investors wish to maintain a diversified industrial structure, not specializing according to their comparative a...
full textUniversity revenue diversification: a path to financial stability
The purpose of present study was to investigate revenue diversification among Iranian public universities in order to improve the stability and flexibility of financial resources. A quantitative practical correlational research design was utilized for this study. The spatial scope of research was one and two level comprehensive public and industrial public universities during 2013-2018. Data we...
full textMy Resources
Journal title
volume 12 issue 42
pages 601- 628
publication date 2020-02
By following a journal you will be notified via email when a new issue of this journal is published.
No Keywords
Hosted on Doprax cloud platform doprax.com
copyright © 2015-2023