What do we know about the impact of income diversification on bank performance? A systematic literature review

This paper dresses a literature systematic review based on 83 peer-reviewed papers studying the impact of income diversification on bank performance. This review is motivated especially by the mixed literature findings about the effectiveness of income diversification on bank performance. Findings indicate that the nature of the effect of diversification on bank performance depends on a range of factors concerning the research methodology adopted. Indeed, the results reveal that the mixed results may be caused by the fact that researchers have examined the diversification–performance relationship in different study settings (US, Europe, MENA, Asia) using different study periods, different measures of diversification, and performance, different estimation methods and different regression models including different control variables. We think that our review would be important for practitioners and regulators to assess the empirical benefits of this profound change in the traditional banking business. Also, our paper might highlight the related pertinent academic issues that should be addressed in the future.