2011/07/01 by Saoussen Ben Gamra, Gamra, Saoussen Ben, Dominique Plihon +1
Business, Management and Accounting · Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #Corporate Finance and Governance #FOS: Economics and business #General Finance (q-fin.GN) #Islamic Finance and Banking Studies
paper · doi:10.48550/arxiv.1107.0170
openalex publication_date 2011/07/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
Shaped by structural forces of change, banking in emerging markets has recently experienced a decline in its traditional activities, leading banks to diversify into new business strategies. This paper examines whether the observed shift into non-interest based activities improves financial performance. Using a sample of 714 banks across 14 East-Asian and Latin-American countries over the post 1997-crisis changing structure, we find that diversification gains are more than offset by the cost of increased exposure to the non-interest income, specifically by the trading income volatility. But this diversification performance's effect is found to be no linear with risk, and significantly not uniform among banks and across business lines. An implication of these findings is that banking institutions can reap diversification benefits as long as they well-studied it depending on their specific characteristics, competences and risk levels, and as they choose the right niche.