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Profitability and risk in relation to income diversification of Vietnamese commercial banking system

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Issue Date
2016
Author
Vo Xuan Vinh
Co-Author
Tran Thi Phuong Mai
Host Item
Journal of Economic Development
ISSN
1859 -1124
Metadata

Show full item record


Issue Date
2016
Author
Vo Xuan Vinh
Co-Author
Tran Thi Phuong Mai
Metadata

Show full item record

Metadata Views

41

Content Views

0

Abstract

Employing a panel data set including 37 joint-stock commercial banks covering the period from 2006 to 2013, this paper investigates the impact of income diversification on bank risk and returns. Our results show that increased income diversification results in higher rates of bank returns. However, when risk is considered, the increased income diversification leads to lower risk-adjusted returns. Empirical evidence also shows that the income diversification is not beneficial to joint-stock commercial banks in Vietnam.

Keywords
Income diversification, Bank, Returns, Risk
URI
http://digital.lib.ueh.edu.vn/handle/UEH/55249
http://jabes.ueh.edu.vn/Home/SearchArticle?article_Id=07e419b7-7532-409c-a648-4f2282e35059
Publisher
Trường Đại học Kinh tế Tp. Hồ Chí Minh
DOI
http://doi.org/10.24311/jabes/2016.23.2.05
Reference
Acharya, V. V., Hasan, I., &Saunders, A. (2006). Should banks be diversified? Evidence from individual bankloan portfolios. The Journal of Business,79(3), 1355–1412.

Baele, L., De Jonghe, O., & VanderVennet, R. (2007). Does the stock market value bank diversification? Journal of Banking & Finance, 31(7), 1999–2023.

Carlson, M. (2004). Are branch banksbetter survivors? Evidence from the depression era. Economic Inquiry, 42(1), 111–126.

Chiorazzo, V., Milani, C., &Salvini, F. (2008). Income diversification and bank performance: Evidence fromItalian banks. Journal of FinancialServices Research, 33(3), 181–203.

DeYoung, R., & Rice, T. (2004).Noninterest income and financial performance at US commercial banks. Financial Review, 39(1), 101–127.

DeYoung, R., & Roland, K. P.(2001). Product mix and earnings volatility at commercial banks: Evidence froma degree of total leverage model. Journalof Financial Intermediation, 10(1), 54–84.

Elsas, R., Hackethal, A., &Holzhäuser, M. (2010). The anatomy of bank diversification. Journal of Banking & Finance, 34(6), 1274–1287.

Grossman, R. S. (1994). The shoe thatdidn't drop: Explaining banking stability during the great depression. The Journal of Economic History, 54(03), 654–682.

Gurbuz, A. O., Yanik, S., & Ayturk,Y. (2013). Income diversification and bank performance: Evidence from Turkishbanking sector. Journal of BRSA Bankingand Financial Markets, 7(1), 9–29.

Landskroner, Y., Ruthenberg, D., &Zaken, D. (2005). Diversification and performance in banking: The Israeli case.Journal of Financial Services Research,27(1), 27–49.

Lee, C. C., Hsieh, M. F., & Yang,S. J. (2014). The relationship between revenue diversification and bankperformance: Do financial structures and financial reforms matter? Japan and the World Economy, 29,18–35.

Lei, A. C., & Song, Z. (2013).Liquidity creation and bank capital structure in China. Global Finance Journal, 24(3), 188–202.

Lepetit, L., Nys, E., Rous, P., &Tarazi, A. (2008). Bank income structure and risk: An empirical analysis ofEuropean banks. Journal of Banking &Finance, 32(8), 1452–1467.

Niu, J. (2012). An empirical analysisof the relation between bank charter value and risk taking. The Quarterly Review of Economics andFinance, 52(3), 298–304.

Pennathur, A. K., Subrahmanyam, V.,& Vishwasrao, S. (2012). Income diversification and risk: Does ownershipmatter? An empirical examination of Indian banks. Journal of Banking & Finance, 36(8), 2203–2215.

Sanya, S., & Wolfe, S. (2011). Canbanks in emerging economies benefit from revenue diversification? Journal of Financial Services Research, 40(1-2), 79–101.

Smith, R., Staikouras, C., & Wood,G. (2003). Non-interest income and totalincome stability (Working Paper No.198). London, UK: Bank of England.

Stiroh, K. J. (2004a). Diversificationin banking: Is noninterest income the answer? Journal of Money, Credit and Banking, 36(5), 853–882.

Stiroh, K. J. (2004b). Do communitybanks benefit from diversification? Journalof Financial Services Research, 25(2-3), 135–160.

Stiroh, K. J. (2006). A portfolio viewof banking with interest and noninterest activities. Journal of Money, Credit and Banking, 38(5), 1351–1361.

Stiroh, K. J., & Rumble, A. (2006).The dark side of diversification: The case of US financial holding companies. Journal of Banking & Finance, 30(8), 2131–2161.

Trujillo‐Ponce, A. (2013). Whatdetermines the profitability of banks? Evidence from Spain. Accounting & Finance, 53(2), 561–586.

Wagner,W. (2010). Diversification at financial institutions and systemic crises. Journal of Financial Intermediation, 19(3), 373–386.

Acharya, V. V., Hasan, I., &Saunders, A. (2006). Should banks be diversified? Evidence from individual bankloan portfolios. The Journal of Business,79(3), 1355–1412.

Baele, L., De Jonghe, O., & VanderVennet, R. (2007). Does the stock market value bank diversification? Journal of Banking & Finance, 31(7), 1999–2023.

Carlson, M. (2004). Are branch banksbetter survivors? Evidence from the depression era. Economic Inquiry, 42(1), 111–126.

Chiorazzo, V., Milani, C., &Salvini, F. (2008). Income diversification and bank performance: Evidence fromItalian banks. Journal of FinancialServi...
See More
Appears in Collections:JABES in English

There are no files associated with this item.



Profitability and risk in relation to income diversification of Vietnamese commercial banking system

TweetLikeShare# Shares: 0

Metadata Views

41

Content Views

0

Issue Date
2016
Author
Vo Xuan Vinh
Co-Author
Tran Thi Phuong Mai
Host Item
Journal of Economic Development
ISSN
1859 -1124
Metadata

Show full item record


Issue Date
2016
Author
Vo Xuan Vinh
Co-Author
Tran Thi Phuong Mai
Metadata

Show full item record

Metadata Views

41

Content Views

0

Abstract

Employing a panel data set including 37 joint-stock commercial banks covering the period from 2006 to 2013, this paper investigates the impact of income diversification on bank risk and returns. Our results show that increased income diversification results in higher rates of bank returns. However, when risk is considered, the increased income diversification leads to lower risk-adjusted returns. Empirical evidence also shows that the income diversification is not beneficial to joint-stock commercial banks in Vietnam.

Keywords
Income diversification, Bank, Returns, Risk
URI
http://digital.lib.ueh.edu.vn/handle/UEH/55249
http://jabes.ueh.edu.vn/Home/SearchArticle?article_Id=07e419b7-7532-409c-a648-4f2282e35059
Publisher
Trường Đại học Kinh tế Tp. Hồ Chí Minh
DOI
http://doi.org/10.24311/jabes/2016.23.2.05
Reference
Acharya, V. V., Hasan, I., &Saunders, A. (2006). Should banks be diversified? Evidence from individual bankloan portfolios. The Journal of Business,79(3), 1355–1412.

Baele, L., De Jonghe, O., & VanderVennet, R. (2007). Does the stock market value bank diversification? Journal of Banking & Finance, 31(7), 1999–2023.

Carlson, M. (2004). Are branch banksbetter survivors? Evidence from the depression era. Economic Inquiry, 42(1), 111–126.

Chiorazzo, V., Milani, C., &Salvini, F. (2008). Income diversification and bank performance: Evidence fromItalian banks. Journal of FinancialServices Research, 33(3), 181–203.

DeYoung, R., & Rice, T. (2004).Noninterest income and financial performance at US commercial banks. Financial Review, 39(1), 101–127.

DeYoung, R., & Roland, K. P.(2001). Product mix and earnings volatility at commercial banks: Evidence froma degree of total leverage model. Journalof Financial Intermediation, 10(1), 54–84.

Elsas, R., Hackethal, A., &Holzhäuser, M. (2010). The anatomy of bank diversification. Journal of Banking & Finance, 34(6), 1274–1287.

Grossman, R. S. (1994). The shoe thatdidn't drop: Explaining banking stability during the great depression. The Journal of Economic History, 54(03), 654–682.

Gurbuz, A. O., Yanik, S., & Ayturk,Y. (2013). Income diversification and bank performance: Evidence from Turkishbanking sector. Journal of BRSA Bankingand Financial Markets, 7(1), 9–29.

Landskroner, Y., Ruthenberg, D., &Zaken, D. (2005). Diversification and performance in banking: The Israeli case.Journal of Financial Services Research,27(1), 27–49.

Lee, C. C., Hsieh, M. F., & Yang,S. J. (2014). The relationship between revenue diversification and bankperformance: Do financial structures and financial reforms matter? Japan and the World Economy, 29,18–35.

Lei, A. C., & Song, Z. (2013).Liquidity creation and bank capital structure in China. Global Finance Journal, 24(3), 188–202.

Lepetit, L., Nys, E., Rous, P., &Tarazi, A. (2008). Bank income structure and risk: An empirical analysis ofEuropean banks. Journal of Banking &Finance, 32(8), 1452–1467.

Niu, J. (2012). An empirical analysisof the relation between bank charter value and risk taking. The Quarterly Review of Economics andFinance, 52(3), 298–304.

Pennathur, A. K., Subrahmanyam, V.,& Vishwasrao, S. (2012). Income diversification and risk: Does ownershipmatter? An empirical examination of Indian banks. Journal of Banking & Finance, 36(8), 2203–2215.

Sanya, S., & Wolfe, S. (2011). Canbanks in emerging economies benefit from revenue diversification? Journal of Financial Services Research, 40(1-2), 79–101.

Smith, R., Staikouras, C., & Wood,G. (2003). Non-interest income and totalincome stability (Working Paper No.198). London, UK: Bank of England.

Stiroh, K. J. (2004a). Diversificationin banking: Is noninterest income the answer? Journal of Money, Credit and Banking, 36(5), 853–882.

Stiroh, K. J. (2004b). Do communitybanks benefit from diversification? Journalof Financial Services Research, 25(2-3), 135–160.

Stiroh, K. J. (2006). A portfolio viewof banking with interest and noninterest activities. Journal of Money, Credit and Banking, 38(5), 1351–1361.

Stiroh, K. J., & Rumble, A. (2006).The dark side of diversification: The case of US financial holding companies. Journal of Banking & Finance, 30(8), 2131–2161.

Trujillo‐Ponce, A. (2013). Whatdetermines the profitability of banks? Evidence from Spain. Accounting & Finance, 53(2), 561–586.

Wagner,W. (2010). Diversification at financial institutions and systemic crises. Journal of Financial Intermediation, 19(3), 373–386.

Acharya, V. V., Hasan, I., &Saunders, A. (2006). Should banks be diversified? Evidence from individual bankloan portfolios. The Journal of Business,79(3), 1355–1412.

Baele, L., De Jonghe, O., & VanderVennet, R. (2007). Does the stock market value bank diversification? Journal of Banking & Finance, 31(7), 1999–2023.

Carlson, M. (2004). Are branch banksbetter survivors? Evidence from the depression era. Economic Inquiry, 42(1), 111–126.

Chiorazzo, V., Milani, C., &Salvini, F. (2008). Income diversification and bank performance: Evidence fromItalian banks. Journal of FinancialServi...
See More
Appears in Collections:JABES in English

There are no files associated with this item.



Citation

APA    Vinh, V. X. (2016). Profitability and risk in relation to income diversification of Vietnamese commercial banking system. (Journal Article). http://digital.lib.ueh.edu.vn/handle/UEH/55249
   
MLA    Vo Xuan Vinh. Profitability and risk in relation to income diversification of Vietnamese commercial banking system. 2016. Trường Đại học Kinh tế Tp. Hồ Chí Minh. Journal Article. http://digital.lib.ueh.edu.vn/handle/UEH/55249
   
Chicago    Vo Xuan Vinh. "Profitability and risk in relation to income diversification of Vietnamese commercial banking system. "(Journal Article, Trường Đại học Kinh tế Tp. Hồ Chí Minh, 2016)
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