Original scientific paper
https://doi.org/10.1080/1331677X.2020.1782242
Competition, diversification and performance in dual banking: a panel VAR analysis
Fazelina Sahul Hamid
Mansor H. Ibrahim
Abstract
This article investigates the dynamic relationship among competition,
diversification and bank performance using data for 18 countries
with a dual banking system over the period 2000 to 2016.
Analyses using panel vector autoregression (P.V.A.R.) model,
impulse response function (I.R.F.) and variance decomposition
(V.D.C.) methods confirm that market power increases the profitability
and the stability of banks the dual banking system while
revenue diversification reduces them. Market power increases revenue
diversification of banks. Segregating the sample of banks
into emerging and developing countries, we find that positive
impact of market power on profitability is stronger for emerging
countries. Even though we find that revenue diversification has a
more damaging effect on the profitability of banks in the developing
countries, it only dampens the stability of banks in emerging
countries. In addition, we find that asset diversification
dampens the stability of banks. However, it has a more positive
impact on the profitability of banks in emerging economies.
Keywords
competition; diversification; bank performance; stability; dual banking
Hrčak ID:
301133
URI
Publication date:
31.12.2021.
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