Open AccessFinancial crisis and diversification strategies: the impact on bank risk and performance
Author(s) -
Duy Khanh Pham,
Vu Minh Ngo,
Huan Huu Nguyen,
Toan Linh Vu Le
Publication year - 2021
Publication title -
economics and business letters
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.197
H-Index - 4
ISSN - 2254-4380
DOI - 10.17811/ebl.10.3.2021.249-261
Subject(s) - diversification (marketing strategy) , financial crisis , business , financial system , emerging markets , finance , economics , macroeconomics , marketing
The paper investigates the impacts of diversification strategies on various indicators of bank risks and performance in emerging markets before, during, and after the global financial crisis. We use a data set of 44 commercial banks in Vietnam over the period 2002-2019 and the Generalised Method of Moments (GMM). The results suggest that income and funding diversification improve bank performance without increasing their risk-taking. During the financial crisis, assets and funding diversity help reduce risk, while income diversified banks bear more risk. The empirical findings show that different diversification dimensions affect bank risk and performance differently during crisis and non-crisis periods so bank managers need to adjust their strategy accordingly.