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Diversification in banking: the role of business segments and size

Author

Listed:
  • Claudio Zara

    (Università Bocconi)

  • Luca Cerrato

    (Università Bocconi)

Abstract

This paper investigates banking diversification in terms of business combinations which carry out customer frontend operations, also considering different client typologies. More in details, referring to 2001-2013 span, our research explores whether business diversification brings benefits to banks through obtaining independent performance amongst businesses that reflects more stability of the overall results at equity/shareholders level. We found that specialized businesses performances, pertaining to corporate, investment and private banking business combinations, are poorly correlated with those affecting retail banking. This proves that bank managers, pursuing a business diversification strategy, were able to obtain an effective risk diversification at business portfolio level. Moreover, we found that financial crisis played a negligible role in altering results from business diversification, while bank size affected more. This research offers an original contribution to the studies on diversification in the banking industry exploring a driver, business diversification, that was not yet analysed in the literature

Suggested Citation

  • Claudio Zara & Luca Cerrato, 2018. "Diversification in banking: the role of business segments and size," BANCARIA, Bancaria Editrice, vol. 3, pages 20-41, March.
    • Handle: RePEc:ban:bancar:v:3:y:2018:m:march:p:20-41
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    More about this item

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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