Diversification, size, and risk at bank holding companies
AbstractThis paper shows that large BHCs are better diversified than small BHCs based on market measures of diversification. We find, however, that better diversification does not translate into reductions in overall risk. The risk reducing potential of diversification at large BHCs is offset by their lower capital ratios, larger C&I loan portfolios, and greater use of derivatives. Our results suggest that asset growth should enhance diversification but that the effects on risk will depend on the extent to which growth is accompanied by changes in portfolio attributes. Using data from 1980 to 1993, we find that BHC asset growth has, in fact, been accompanied by economically important reductions in risk.
Download InfoIf 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.
Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Research Paper with number 9506.
Date of creation: 1995
Date of revision:
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.:
- John H. Boyd & Mark Gertler, 1995.
"Are Banks Dead? Or Are the Reports Greatly Exaggerated?,"
NBER Working Papers
5045, National Bureau of Economic Research, Inc.
- John H. Boyd & Mark Gertler, 1994. "Are banks dead? Or are the reports greatly exaggerated?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-23.
- John H. Boyd & Mark Gertler, 1994. "Are banks dead? or, are the reports greatly exaggerated?," Proceedings 25, Federal Reserve Bank of Chicago.
- John H. Boyd & Mark Gertler, 1994. "Are banks dead? or, are the reports greatly exaggerated?," Working Papers 531, Federal Reserve Bank of Minneapolis.
- Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
- Edward J. Kane & Haluk Unal, 1988. "Change in Market Assessments of Deposit-Institution Riskiness," NBER Working Papers 2530, National Bureau of Economic Research, Inc.
- Mark E. Levonian, 1994. "Interstate banking and risk," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jul22.
- Heston, Steven L. & Rouwenhorst, K. Geert, 1994. "Does industrial structure explain the benefits of international diversification?," Journal of Financial Economics, Elsevier, vol. 36(1), pages 3-27, August.
- Katherine A. Samolyk, 1994. "U.S. banking sector trends: assessing disparities in industry performance," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-17.
- Rosie Smith & Christos Staikouras & Geoffrey Wood, 2003. "Non-interest income and total income stability," Bank of England working papers 198, Bank of England.
- Andrew Maredza and Sylvanus Ikhide, 2013. "The Impact of the Global Financial Crisis on Efficiency and Productivity of the Banking System in South Africa," Working Papers 328, Economic Research Southern Africa.
- Christian Calmès & Raymond Théoret, 2013. "The change in banks' product mix, diversification and performance: An application of multivariate GARCH to Canadian data," RePAd Working Paper Series UQO-DSA-wp012013, Département des sciences administratives, UQO.
- Robert DeYoung & Karin P. Roland, 1999. "Product mix and earnings volatility at commercial banks: evidence from a degree of leverage model," Working Paper Series WP-99-6, Federal Reserve Bank of Chicago.
- Joseph P. Hughes & William W. Lang & Loretta J. Mester & Choon-Geol Moon, 1996. "Safety in numbers? Geographic diversification and bank insolvency risk," Working Papers 96-14, Federal Reserve Bank of Philadelphia.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber).
If references are entirely missing, you can add them using this form.