Financial crisis and diversification strategies: the impact on bank risk and performance

Authors

  • Duy Khanh Pham School of Banking University of Economics Ho Chi Minh City Vietnam
  • Vu Minh Ngo
  • Huan Huu Nguyen School of Banking University of Economics Ho Chi Minh City
  • Toan Linh Vu Le Faculty of Banking - Finance Van Lang University

DOI:

https://doi.org/10.17811/ebl.10.3.2021.249-261

Abstract

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.

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Published

2021-08-02

How to Cite

Pham, D. K., Ngo, V. M., Nguyen, H. H., & Le, T. L. V. (2021). Financial crisis and diversification strategies: the impact on bank risk and performance. Economics and Business Letters, 10(3), 249-261. https://doi.org/10.17811/ebl.10.3.2021.249-261