Bank Risk and Non-Interest Income Activities in the Indonesian Banking Industry
The recent trend of product diversification in the Indonesian banking industry underscores the importance of non-interest income activities. This study examines the relationship between product diversification and bank risk over the period of 2002-2008. Our analysis shows clear evidence that the effect of product diversification on bank risk depends highly on the bank's asset size. Specifically, the degree of product diversification is negatively associated with bank risk for small-sized banks. Conversely, the degree of product diversification is positively related to bank risk for large-sized banks. This finding suggests that deregulation encouraging banks to become more involved in non-traditional activities may have an adverse effect on the overall banking system where large-sized banks are playing a significant role in Indonesia.
|Date of creation:||Apr 2012|
|Contact details of provider:|| Postal: 777 Kokusai-cho, Minami Uonuma0-shi, Niigata 949-7277 JAPAN|
Web page: http://www.iuj.ac.jp/research/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kwast, Myron L., 1989. "The impact of underwriting and dealing on bank returns and risks," Journal of Banking & Finance, Elsevier, vol. 13(1), pages 101-125, March.
- Stiroh, Kevin J. & Rumble, Adrienne, 2006. "The dark side of diversification: The case of US financial holding companies," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2131-2161, August.
- Stiroh, Kevin J, 2004.
"Diversification in Banking: Is Noninterest Income the Answer?,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 36(5), pages 853-882, October.
- Kevin J. Stiroh, 2002. "Diversification in banking: is noninterest income the answer?," Staff Reports 154, Federal Reserve Bank of New York.
- Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008. "Bank income structure and risk: An empirical analysis of European banks," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1452-1467, August.
- Laetitia Lepetit & Emmanuelle Nys & Philippe Rous & Amine Tarazi, 2008. "Bank income structure and risk: An empirical analysis of European banks," Post-Print hal-01098960, HAL.
- Laetitia Lepetit & Emmanuelle Nys & Philippe Rous & Amine Tarazi, 2008. "Bank income structure and risk: An empirical analysis of European banks," Post-Print hal-00844820, HAL.
- Saunders, Anthony & Walter, Ingo, 1994. "Universal Banking in the United States: What Could We Gain? What Could We Lose?," OUP Catalogue, Oxford University Press, number 9780195080698.
- John H. Boyd & Stanley L. Graham, 1988. "The profitability and risk effects of allowing bank holding companies to merge with other financial firms: a simulation study," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-20.
- DeYoung, Robert & Roland, Karin P., 2001. "Product Mix and Earnings Volatility at Commercial Banks: Evidence from a Degree of Total Leverage Model," Journal of Financial Intermediation, Elsevier, vol. 10(1), pages 54-84, January.
- John H. Boyd & Stanley L. Graham, 1988. "The profitability and risk effects of allowing bank holding companies to merge with other financial firms: a simulation study," Proceedings 213, Federal Reserve Bank of Chicago.
- Demsetz, Rebecca S & Strahan, Philip E, 1997. "Diversification, Size, and Risk at Bank Holding Companies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 300-313, August.
- John H. Boyd & Stanley L. Graham, 1986. "Risk, regulation, and bank holding company expansion into nonbanking," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-17.
- Zulverdi, Doddy & Gunadi, Iman & Pramono, Bambang, 2007. "Bank portfolio model and monetary policy in Indonesia," Journal of Asian Economics, Elsevier, vol. 18(1), pages 158-174, February.
- Simon H. Kwan & Elizabeth S. Laderman, 1999. "On the portfolio effects of financial convergence - a review of the literature," Economic Review, Federal Reserve Bank of San Francisco, pages 18-31.
- Gallo, John G. & Apilado, Vincent P. & Kolari, James W., 1996. "Commercial bank mutual fund activities: Implications for bank risk and profitability," Journal of Banking & Finance, Elsevier, vol. 20(10), pages 1775-1791, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:iuj:wpaper:ems_2012_03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kazumi Imai, Office of Academic Affairs)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.