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Effect of Income Diversification on Bank Performance and Risk: Case of Developing Countries

Year 2023, Issue: 76, 34 - 42, 27.04.2023

Gökhan Dağılgan

https://doi.org/10.51290/dpusbe.1197664

Abstract

With the financial liberalization process of the world economy, banks have tended to engage in different activities instead of just traditional lending activities. While the traditional source of income for banks is interest income, non-interest income has also emerged. Therefore, it has become very important for bank managers, regulators, investors and banks to investigate the relationship between income diversification and banking performance and risk. In this study, the effect of income diversification on bank performance and risk was analyzed using the two-stage System GMM method, using annual data and 352 observations for 22 developing countries between 2005 and 2020. In the findings obtained as a result of the analysis, it was determined that income diversification did not affect the bank performance. However, it is concluded that income diversification reduces financial strength and increases banking risk. While the increase in the economic growth rate increases the bank's performance; increases financial strength and reduces risk.

Keywords

Income diversification bank performance banking risk economic growth system GMM

References

  • Baltagi, B.H. (2008). Econometric analysis of panel data, (4.Edition). England: John Wiley & Sons,.
  • Blundell, R. ve Bond, S. (2000). GMM Estimation with persistent panel data: an application to production functions. Econometric Reviews, 19(3), 331-339.
  • Boyd, J.H., Graham, S.L. ve Hewitt, R.S. (1993). Bank holding company mergers with nonbank financial firms: effects on the risk of failure. J. Bank. Financ, 17, 43–63.
  • Chiorazzo, V., Milani, C. ve Salvini, F. (2008). Income diversification and bank performance: evidence from Italian banks. J. Financ. Serv. Res. 33(3), 181–203.
  • Clark, J.A. ve Siems, T.F. (2002). X-efficiency in banking: looking beyond the balance sheet. J. Money Credit Bank, 34(4), 987–1013.
  • Delpachitra, S. ve Lester, L. (2013). Noninterest income: are Australian banks moving away from their traditional businesses?. Econ. Paper, 32(2), 190–199.
  • DeYoung, R. ve Roland, K. (2001). Product mix and earnings volatility at commercial banks: evidence from a degree of total leverage model. J. Financ. Intermed, 10, 54–84.
  • Edirisuriya, P., Gunasekarage, A. ve Dempsey, M. (2015). Bank diversification, performance and stock market response: Evidence from listed public banks in South Asian countries. Journal of Asian Economics, 41, 69-85.
  • Elsas, R., Hackethal, A. ve Holzhauser, M. (2010). The anatomy of bank diversification. J. Bank. Financ, 34, 1274–1287.
  • Gürbüz, A. O., Yanık, S. ve Aytürk, Y. (2013). Income diversification and bank performance: Evidence from Turkish banking sector. Journal of BRSA Banking and Financial Markets, 7(1), 9-29.
  • International Monetary Fund, (2022). World Economic Outlook, countering the cost of living crises. https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world-economic-outlook-october-2022.
  • Levine, R. (2005). Finance and growth: theory and evidence. Handb. Econ. Growth, 1, 865–934.
  • Majumder, M.T.H. ve Uddin, M.J. (2017). The determinants of profitability of nationalized banks in Bangladesh. Int. J. Econ. Bus. Research, 13(4), 335–348.
  • Moudud-Ul-Huq, S., Ashraf, B.N., Gupta, A.D. ve Zheng, C. (2018). Does bank diversification heterogeneously affect performance and risk-taking in ASEAN emerging economies?. Res. Int. Bus. Financ, 46, 342–362.
  • Nisar, S., Peng, K., Wang, S. ve Ashraf, B.N. (2018). The impact of revenue diversification on bank profitability and stability: Empirical evidence from South Asian countries. Int. J. Financ. Stud, 6(2), 40.
  • Roodman, D. (2009). How to do xtabond2: An Introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86-136.
  • Sawada, M. (2013). How does the stock market value bank diversification? Empirical evidence from Japanese banks. Pacific-Basin Finance Journal, 25, 40-61.
  • Stiroh, K.J., (2004). Diversification in banking: is non-interest income the answer?. J. Money Credit Bank., 36, 853–882.
  • Stiroh, K.J. ve Rumble, A. (2006). The dark side of diversification: the case of US financial holding companies. J. Bank. Financ, 30(8), 2131–2161.
  • Zhou, K. (2014). The effect of income diversification on bank risk: evidence from China. Emerg. Markets Financ. Trade, 50, 201–213.

Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği

Year 2023, Issue: 76, 34 - 42, 27.04.2023

Gökhan Dağılgan

https://doi.org/10.51290/dpusbe.1197664

Abstract

Dünya ekonomisinin finansal liberalleşme süreci ile bankalar, sadece geleneksel kredilendirme faaliyetleri yerine farklı faaliyetlerde de bulunmaya yönelmiştir. Bankaların geleneksel gelir kaynağı faiz geliri olmakla birlikte, faiz dışı gelir elde etme durumu da ortaya çıkmıştır. Bundan dolayı banka yöneticileri, düzenleyiciler, yatırımcılar ve bankalar için gelir çeşitlendirmesi ile bankacılık performansı ve riski arasındaki ilişkiyi araştırmak çok önemli bir hale gelmiştir. Bu çalışmada, 22 gelişmekte olan ülkeler için 2005-2020 yılları arasında yıllık veriler ve 352 gözlem kullanılarak, gelir çeşitlendirmesinin banka performansı ve riski üzerindeki etkisi iki aşamalı Sistem GMM yöntemi kullanılarak analiz edilmiştir. Analiz sonucu elde edilen bulgularda, gelir çeşitlendirmesinin banka performansını etkilemediği belirlenmiştir. Fakat gelir çeşitlendirmesinin finansal güçlülüğü azalttığı ve bankacılık riskini artırdığı sonucuna ulaşılmıştır. Ekonomik büyüme oranındaki artış ise banka performansını artırırken; finansal güçlülüğü artırıp riski azaltmaktadır.

Keywords

Gelir çeşitlendirme banka performansı bankacılık riski ekonomik büyüme sistem GMM

References

  • Baltagi, B.H. (2008). Econometric analysis of panel data, (4.Edition). England: John Wiley & Sons,.
  • Blundell, R. ve Bond, S. (2000). GMM Estimation with persistent panel data: an application to production functions. Econometric Reviews, 19(3), 331-339.
  • Boyd, J.H., Graham, S.L. ve Hewitt, R.S. (1993). Bank holding company mergers with nonbank financial firms: effects on the risk of failure. J. Bank. Financ, 17, 43–63.
  • Chiorazzo, V., Milani, C. ve Salvini, F. (2008). Income diversification and bank performance: evidence from Italian banks. J. Financ. Serv. Res. 33(3), 181–203.
  • Clark, J.A. ve Siems, T.F. (2002). X-efficiency in banking: looking beyond the balance sheet. J. Money Credit Bank, 34(4), 987–1013.
  • Delpachitra, S. ve Lester, L. (2013). Noninterest income: are Australian banks moving away from their traditional businesses?. Econ. Paper, 32(2), 190–199.
  • DeYoung, R. ve Roland, K. (2001). Product mix and earnings volatility at commercial banks: evidence from a degree of total leverage model. J. Financ. Intermed, 10, 54–84.
  • Edirisuriya, P., Gunasekarage, A. ve Dempsey, M. (2015). Bank diversification, performance and stock market response: Evidence from listed public banks in South Asian countries. Journal of Asian Economics, 41, 69-85.
  • Elsas, R., Hackethal, A. ve Holzhauser, M. (2010). The anatomy of bank diversification. J. Bank. Financ, 34, 1274–1287.
  • Gürbüz, A. O., Yanık, S. ve Aytürk, Y. (2013). Income diversification and bank performance: Evidence from Turkish banking sector. Journal of BRSA Banking and Financial Markets, 7(1), 9-29.
  • International Monetary Fund, (2022). World Economic Outlook, countering the cost of living crises. https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world-economic-outlook-october-2022.
  • Levine, R. (2005). Finance and growth: theory and evidence. Handb. Econ. Growth, 1, 865–934.
  • Majumder, M.T.H. ve Uddin, M.J. (2017). The determinants of profitability of nationalized banks in Bangladesh. Int. J. Econ. Bus. Research, 13(4), 335–348.
  • Moudud-Ul-Huq, S., Ashraf, B.N., Gupta, A.D. ve Zheng, C. (2018). Does bank diversification heterogeneously affect performance and risk-taking in ASEAN emerging economies?. Res. Int. Bus. Financ, 46, 342–362.
  • Nisar, S., Peng, K., Wang, S. ve Ashraf, B.N. (2018). The impact of revenue diversification on bank profitability and stability: Empirical evidence from South Asian countries. Int. J. Financ. Stud, 6(2), 40.
  • Roodman, D. (2009). How to do xtabond2: An Introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86-136.
  • Sawada, M. (2013). How does the stock market value bank diversification? Empirical evidence from Japanese banks. Pacific-Basin Finance Journal, 25, 40-61.
  • Stiroh, K.J., (2004). Diversification in banking: is non-interest income the answer?. J. Money Credit Bank., 36, 853–882.
  • Stiroh, K.J. ve Rumble, A. (2006). The dark side of diversification: the case of US financial holding companies. J. Bank. Financ, 30(8), 2131–2161.
  • Zhou, K. (2014). The effect of income diversification on bank risk: evidence from China. Emerg. Markets Financ. Trade, 50, 201–213.
There are 20 citations in total.

Details

Primary Language Turkish
Journal Section RESEARCH ARTICLES
Authors

Gökhan Dağılgan 0000-0002-6916-6506

Publication Date April 27, 2023
Published in Issue Year 2023 Issue: 76

Cite

APA Dağılgan, G. (2023). Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi(76), 34-42. https://doi.org/10.51290/dpusbe.1197664
AMA Dağılgan G. Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi. April 2023;(76):34-42. doi:10.51290/dpusbe.1197664
Chicago Dağılgan, Gökhan. “Gelir Çeşitlendirmesinin Banka Performansına Ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği”. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi, no. 76 (April 2023): 34-42. https://doi.org/10.51290/dpusbe.1197664.
EndNote Dağılgan G (April 1, 2023) Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi 76 34–42.
IEEE G. Dağılgan, “Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği”, Dumlupınar Üniversitesi Sosyal Bilimler Dergisi, no. 76, pp. 34–42, April 2023, doi: 10.51290/dpusbe.1197664.
ISNAD Dağılgan, Gökhan. “Gelir Çeşitlendirmesinin Banka Performansına Ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği”. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi 76 (April 2023), 34-42. https://doi.org/10.51290/dpusbe.1197664.
JAMA Dağılgan G. Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi. 2023;:34–42.
MLA Dağılgan, Gökhan. “Gelir Çeşitlendirmesinin Banka Performansına Ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği”. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi, no. 76, 2023, pp. 34-42, doi:10.51290/dpusbe.1197664.
Vancouver Dağılgan G. Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği. Dumlupınar Üniversitesi Sosyal Bilimler Dergisi. 2023(76):34-42.
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