The DOI matches its Crossref record; 12 of the 12 references it cites were found in a registry or an index.
Should Banks Be Diversified? Evidence from Individual Bank Loan Portfolios*
Abstract
We study the effect of loan portfolio focus versus diversification on the return and the risk of 105 Italian banks over the period 1993–99 using data on bank‐by‐bank exposures to different industries and sectors. We find that diversification is not guaranteed to produce superior performance and/or greater safety for banks. For high‐risk banks, diversification reduces bank return while producing riskier loans. For low‐risk banks, diversification produces either an inefficient risk‐return trade‐off or only a marginal improvement. Our results are consistent with a deterioration in the effectiveness of bank monitoring at high risk‐levels and upon lending expansion into newer or competitive industries.
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Citations
Cites
Financial intermediation and delegated monitoring
Diamond, D. W. (1984) · The Review of Economic Studies · doi:10.2307/2297430 · Cited by 8,476
Hannan, E. J. (1973) · Technometrics · doi:10.1080/00401706.1973.10489024 · Cited by 3,210
SHARPE, S. A. (1990) · The Journal of Finance · doi:10.1111/j.1540-6261.1990.tb02427.x · Cited by 2,324
Some evidence on the uniqueness of bank loans
James, C. (1987) · Journal of Financial Economics · doi:10.1016/0304-405x(87)90003-1 · Cited by 1,610
Can Relationship Banking Survive Competition?
Boot, A. W. A., & Thakor, A. V. (2000) · The Journal of Finance · doi:10.1111/0022-1082.00223 · Cited by 1,590
Financial Intermediary-Coalitions
Boyd, J. H., & Prescott, E. C. (1985) · doi:10.21034/sr.87 · Cited by 1,440
Financial intermediary-coalitions
Boyd, J. H., & Prescott, E. C. (1986) · Journal of Economic Theory · doi:10.1016/0022-0531(86)90115-8 · Cited by 1,385
Multiple versus Single Banking Relationships: Theory and Evidence
Detragiache, E., Garella, P. G., & Guiso, L. (2000) · The Journal of Finance · doi:10.1111/0022-1082.00243 · Cited by 729
The Effects of Banking Mergers on Loan Contracts
Sapienza, P. (2002) · The Journal of Finance · doi:10.1111/1540-6261.00424 · Cited by 623
Cooper, R. A., Johnston, J., & Theil, H. (1976) · The Statistician · doi:10.2307/2988145 · Cited by 489
Cited by
Bank Diversification and Overall Financial Strength: International Evidence
Doumpos, M., Gaganis, C., & Pasiouras, F. (2016) · Financial Markets, Institutions & Instruments · doi:10.1111/fmii.12069 · Cited by 91
Finance and Efficiency: Do Bank Branching Regulations Matter?
Acharya, V. V., Imbs, J., & Sturgess, J. (2011) · Review of Finance · doi:10.1093/rof/rfq009 · Cited by 58
Self-citation
Metadata
- Authors
- Acharya, V. V., Hasan, I., & Saunders, A.
- Venue
- The Journal of Business
- Publisher
- University of Chicago Press
- Published
- 2006-05
- Volume
- 79
- Issue
- 3
- Pages
- 1355-1412
- ISSN
- 0021-9398 (ISSN-L)
- 1537-5374
- OpenAlex
- W3122914324
- Cited by
- 699
- References
- 12
- FWCI
- 27.25
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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