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Diversification, bank risk taking and performance: evidence from Tunisian banks

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  • Khadija Mnasri
  • Ezzeddine Abaoub

Abstract

In this paper, we carry out an empirical study for the Tunisian market to shed light on the question whether the observed shift into non-interest income activities improves performance of commercial banks. Our main results can be summarised in three statements: banks diversified across both interest and non-interest income generating activities have higher levels of raw share returns than those focusing their activities; focusing into non-interest generating activities decreases market profitability of banks; banks that are functionally diversified also experience higher relative levels of systematic risk while the effect on the idiosyncratic risk component is non-significant.

Suggested Citation

  • Khadija Mnasri & Ezzeddine Abaoub, 2010. "Diversification, bank risk taking and performance: evidence from Tunisian banks," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 3(1), pages 13-32.
    • Handle: RePEc:ids:ijmefi:v:3:y:2010:i:1:p:13-32
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    Cited by:

    1. Yang, Hsin-Feng & Liu, Chih-Liang & Yeutien Chou, Ray, 2020. "Bank diversification and systemic risk," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 311-326.
    2. Haykel Zouaoui & Faten Zoghlami, 2023. "What do we know about the impact of income diversification on bank performance? A systematic literature review," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(3), pages 286-309, September.

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