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Market power, revenue diversification and bank stability: Evidence from selected South Asian countries

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  • Nguyen, My
  • Skully, Michael
  • Perera, Shrimal

Abstract

We investigate the association between bank market power and revenue diversification and whether revenue diversification interacts with market power impacting on individual bank stability. These issues are explored in the context of four South Asian banking markets (Bangladesh, India, Pakistan and Sri Lanka) during 1998–2008. Our Generalised Methods of Moments (GMM) estimators indicate that South Asian banks with greater market power focus more on traditional interest income generating activities. Such banks, however, become more stable when they diversify across both interest- and non-interest income activities.

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  • Nguyen, My & Skully, Michael & Perera, Shrimal, 2012. "Market power, revenue diversification and bank stability: Evidence from selected South Asian countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 897-912.
  • Handle: RePEc:eee:intfin:v:22:y:2012:i:4:p:897-912
    DOI: 10.1016/j.intfin.2012.05.008
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    4. Perera, Anil & Ralston, Deborah & Wickramanayake, J., 2014. "Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 195-216.
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    16. Maoyong Cheng & Hong Zhao & Junrui Zhang, 2014. "What precludes the development of noninterest activities in Chinese commercial banks from the perspective of the price of interest activities?," Applied Economics, Taylor & Francis Journals, vol. 46(21), pages 2453-2461, July.
    17. Nguyen, My & Perera, Shrimal & Skully, Michael, 2016. "Bank market power, ownership, regional presence and revenue diversification: Evidence from Africa," Emerging Markets Review, Elsevier, vol. 27(C), pages 36-62.
    18. Mostak Ahamed, M. & Mallick, Sushanta K., 2017. "House of restructured assets: How do they affect bank risk in an emerging market?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 1-14.
    19. Mariarosa Borroni & Simone Rossi, 2017. "Does revenue diversification still matter in banking? Evidence from some European countries," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1723, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

    More about this item

    Keywords

    Market power; Bank stability; Revenue diversification; South Asian; Lerner index;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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