Geographic income diversification of large European banks: Better or worse?
European Financial Management, cilt.30, sa.4, ss.1787-1828, 2024 (SSCI, Scopus)
- Yayın Türü: Makale / Tam Makale
- Cilt numarası: 30 Sayı: 4
- Basım Tarihi: 2024
- Doi Numarası: 10.1111/eufm.12461
- Dergi Adı: European Financial Management
- Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
- Sayfa Sayıları: ss.1787-1828
- Anahtar Kelimeler: bank performance, bank risk-taking, board diversity, European banking, geographic income diversification
- Kırklareli Üniversitesi Adresli: Evet
Özet
This study examines the impact of geographic income diversification of large European banks on performance and risk-taking by using unique data. By dividing the total operating income into three regions as the home country, the rest of Europe and the rest of the world, we find evidence that geographic income diversification reduces bank performance and increases risk-taking. Particularly, shifting operations from home countries to other European countries or the rest of the world reduces bank performance and enhances risk-taking unless the bank is highly concentrated in these areas. We also identify contributing channels, including the “follow-the-customer” hypothesis, new subsidiaries and board diversity, to explain the adverse effect.