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What drives the banks' diversification decision? A dynamic nonlinear panel data approach
Author(s) -
Ammar Nesrine,
Boughrara Adel
Publication year - 2019
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3079
Subject(s) - diversification (marketing strategy) , intermediation , profitability index , panel data , loan , financial intermediary , sample (material) , business , margin (machine learning) , net interest margin , financial system , economics , finance , econometrics , return on assets , chemistry , chromatography , marketing , machine learning , computer science
This paper empirically determines the drivers of functional diversification decision for 365 banks set in selected Middle East and North Africa (MENA) countries over 1988–2015. For this purpose, we use a dynamic nonlinear panel data model. Our findings reveal that both market share and financial intermediation stratify the diversification decision for the whole MENA sample. Splitting the sample shows that the risk‐adjusted profitability and the loan loss provision ratio exert a major influence over the diversification indicator for Gulf Cooperation Council (GCC) banks, whereas the net interest margin ratio, the bank market share, and financial intermediation are the major drivers of the strategic decision for the remaining non‐GCC banks.