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Diversification, Size, and Risk at Bank Holding Companies
Abstract
This paper shows that large bank holding companies (BHCs) are better diversified than small BHCs based on market measures of diversification. The authors find, however, that better diversification does not translate into reductions in risk. The risk-reducing potential of diversification at large BHCs is offset by their lower capital ratios and larger commercial and industrial loan portfolios. The authors' results suggest that diversification may provide an important motive for consolidation by allowing BHCs to pursue riskier lending while operating with greater leverage. Copyright 1997 by Ohio State University Press.
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Citations
Cited by
Rating Banks: Risk and Uncertainty in an Opaque Industry
Morgan, D. P. (2002) · American Economic Review · doi:10.1257/00028280260344506 · Cited by 1,241
The effects of bank mergers and acquisitions on small business lending
Berger, A. N., Saunders, A., Scalise, J. M., & Udell, G. F. (1998) · Journal of Financial Economics · doi:10.1016/s0304-405x(98)00036-1 · Cited by 827
Are Competitive Banking Systems More Stable?
SCHAECK, K., CIHAK, M., & WOLFE, S. (2009) · Journal of Money, Credit and Banking · doi:10.1111/j.1538-4616.2009.00228.x · Cited by 549
Entry Restrictions, Industry Evolution, and Dynamic Efficiency: Evidence From Commercial Banking
Jayaratne, J., & Strahan, P. E. (1998) · The Journal of Law and Economics · doi:10.1086/467390 · Cited by 543
Self-citationCEO compensation and bank mergers
Bliss, R. (2001) · Journal of Financial Economics · doi:10.1016/s0304-405x(01)00057-5 · Cited by 445
Metadata
- Authors
- Demsetz, R. S., & Strahan, P. E.
- Venue
- Journal of Money, Credit and Banking
- Publisher
- JSTOR
- Published
- 1997-08
- Volume
- 29
- Issue
- 3
- Pages
- 300
- ISSN
- 0022-2879 (ISSN-L)
- OpenAlex
- W2039987590
- Cited by
- 1,092
- References
- 0
- FWCI
- 26.64
- Type
- journal article
- Language
- en
- Open access
- closed
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
