Advanced Search
MyIDEAS: Login to save this article or follow this journal

Bank income structure and risk: An empirical analysis of European banks

Contents:

Author Info

  • Lepetit, Laetitia
  • Nys, Emmanuelle
  • Rous, Philippe
  • Tarazi, Amine

Abstract

The purpose of this paper is to investigate the relationship between bank risk and product diversification in the changing structure of the European banking industry. Based on a broad set of European banks for the period 1996-2002, our study first shows that banks expanding into non-interest income activities present higher risk and higher insolvency risk than banks which mainly supply loans. However, considering size effects and splitting non-interest activities into both trading activities and commission and fee activities we show that the positive link with risk is mostly accurate for small banks and essentially driven by commission and fee activities. A higher share of trading activities is never associated with higher risk and for small banks it implies, in some cases, lower asset and default risks.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VCY-4R9GGT5-4/1/30c964f408fb9543b3519f5829a1dbd1
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 32 (2008)
Issue (Month): 8 (August)
Pages: 1452-1467

as in new window
Handle: RePEc:eee:jbfina:v:32:y:2008:i:8:p:1452-1467

Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Viral V. Acharya & Iftekhar Hasan & Anthony Saunders, 2002. "The effects of focus and diversification on bank risk and return: evidence from individual bank loan portfolios," Proceedings 905, Federal Reserve Bank of Chicago.
  2. Saunders, Anthony & Walter, Ingo, 1994. "Universal Banking in the United States: What Could We Gain? What Could We Lose?," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195080698, October.
  3. John H. Boyd & Chun Chang & Bruce D. Smith, 1998. "Moral hazard under commercial and universal banking," Working Papers, Federal Reserve Bank of Minneapolis 585, Federal Reserve Bank of Minneapolis.
  4. John H. Boyd & Stanley L. Graham, 1988. "The profitability and risk effects of allowing bank holding companies to merge with other financial firms: a simulation study," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-20.
  5. Gallo, John G. & Apilado, Vincent P. & Kolari, James W., 1996. "Commercial bank mutual fund activities: Implications for bank risk and profitability," Journal of Banking & Finance, Elsevier, Elsevier, vol. 20(10), pages 1775-1791, December.
  6. Kwast, Myron L., 1989. "The impact of underwriting and dealing on bank returns and risks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 13(1), pages 101-125, March.
  7. John, Kose & John, Teresa A. & Saunders, Anthony, 1994. "Universal banking and firm risk-taking," Journal of Banking & Finance, Elsevier, Elsevier, vol. 18(2), pages 307-323, January.
  8. Carter, David A. & McNulty, James E., 2005. "Deregulation, technological change, and the business-lending performance of large and small banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 29(5), pages 1113-1130, May.
  9. Cara S. Lown & Carol L. Osler & Philip E. Strahan & Amir Sufi, 2000. "The changing landscape of the financial services industry: what lies ahead?," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Oct, pages 39-54.
  10. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  11. Stiroh, Kevin J. & Rumble, Adrienne, 2006. "The dark side of diversification: The case of US financial holding companies," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(8), pages 2131-2161, August.
  12. Rosie Smith & Christos Staikouras & Geoffrey Wood, 2003. "Non-interest income and total income stability," Bank of England working papers 198, Bank of England.
  13. DeYoung, Robert & Roland, Karin P., 2001. "Product Mix and Earnings Volatility at Commercial Banks: Evidence from a Degree of Total Leverage Model," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 10(1), pages 54-84, January.
  14. Simon H. Kwan & Elizabeth S. Laderman, 1999. "On the portfolio effects of financial convergence - a review of the literature," Economic Review, Federal Reserve Bank of San Francisco, pages 18-31.
  15. Demsetz, Rebecca S & Strahan, Philip E, 1997. "Diversification, Size, and Risk at Bank Holding Companies," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 29(3), pages 300-313, August.
  16. Allen, Linda & Jagtiani, Julapa, 2000. "The risk effects of combining banking, securities, and insurance activities," Journal of Economics and Business, Elsevier, Elsevier, vol. 52(6), pages 485-497.
  17. John H. Boyd & Stanley L. Graham, 1986. "Risk, regulation, and bank holding company expansion into nonbanking," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-17.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:32:y:2008:i:8:p:1452-1467. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.