Publication:
Financial crisis and diversification strategies: the impact on bank risk and performance
Financial crisis and diversification strategies: the impact on bank risk and performance
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Date
2021
Authors
Duy Khanh Pham
Vu Minh Ngo
Huan Huu Nguyen
Toan Linh Vu Le
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Research Projects
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Abstract
The paper investigates the impacts of diversification strategies on various indicators of bank risks and performance in emerging markets before, during, and after the global financial crisis. We use a data set of 44 commercial banks in Vietnam over the period 2002-2019 and the Generalised Method of Moments (GMM). The results suggest that income and funding diversification improve bank performance without increasing their risk-taking. During the financial crisis, assets and funding diversity help reduce risk, while income diversified banks bear more risk. The empirical findings show that different diversification dimensions affect bank risk and performance differently during crisis and non-crisis periods so bank managers need to adjust their strategy accordingly.
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Keywords
"bank diversification,
bank performance,
bank risk,
financial crisis,
GMM,
Vietnam JEL Classification Codes: G01,
G21"