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Banks’ Specialization versus Diversification in the Loan Portfolio

Author

Listed:
  • Nadya Jahn

    (University of Muenster)

  • Christoph Memmel

    (Deutsche Bundesbank)

  • Andreas Pfingsten

    (University of Muenster)

Abstract

Do banks with a specialized credit portfolio have superior selection and monitoring abilities? Controlling for the composition of the banks’ loan portfolios, we show that specialized banks have lower loan loss rates. We also see that for more focused German banks in our sample period 2003–2011 the standard deviation of loan loss rates seems to be lower. Moreover, the loan loss rate of a given industry in a bank‘s loan portfolio is lower if the bank has a major exposure to that industry.

Suggested Citation

  • Nadya Jahn & Christoph Memmel & Andreas Pfingsten, 2016. "Banks’ Specialization versus Diversification in the Loan Portfolio," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(1), pages 25-48, April.
    • Handle: RePEc:spr:schmbr:v:17:y:2016:i:1:d:10.1007_s41464-016-0006-7
    DOI: 10.1007/s41464-016-0006-7
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    References listed on IDEAS

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