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Does uniqueness in banking matter?

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  • Liu, Frank Hong
  • Norden, Lars
  • Spargoli, Fabrizio

Abstract

We investigate whether and how the uniqueness of banking activities affects the performance and systemic risk of U.S. banks. We find that banks performing more unique activities exhibit higher profitability and lower risk, controlling for size, diversification, and other key characteristics. We further find that banks’ sensitivity to systemic risk displays an inversely U-shaped relation with activity uniqueness. We interpret the impact of uniqueness in analogy to recent theories showing that systemic diversity promotes financial stability. Our study highlights the role of uniqueness in banking and has important implications for policy makers and banking regulators.

Suggested Citation

  • Liu, Frank Hong & Norden, Lars & Spargoli, Fabrizio, 2020. "Does uniqueness in banking matter?," Journal of Banking & Finance, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:jbfina:v:120:y:2020:i:c:s037842662030203x
    DOI: 10.1016/j.jbankfin.2020.105941
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    Cited by:

    1. Eduardo Minuci & Scott Schuh, 2022. "Are West Virginia Banks Unique?," Working Papers 22-03, Department of Economics, West Virginia University.
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    3. Daniel Broby, 2021. "Financial technology and the future of banking," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-19, December.

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    More about this item

    Keywords

    Banks; Performance; Systemic risk; Diversification; Diversity;
    All these keywords.

    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

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