Income diversification patterns and their impact on bank risk

IF 1.2 4区 经济学 Q3 ECONOMICS Australian Economic Papers Pub Date : 2024-02-20 DOI:10.1111/1467-8454.12339
Parneet Kaur, Aanchal Bansal
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Abstract

This study focuses on the crucial topic of income diversification and its implications for bank risk, using the context of India's public and private Sector banks. The research spans the years 2005–2021, investigating the influence of varying degrees of non-interest income on the risk profiles of Indian banks. Employing a program impact evaluation methodology, the study employs the generalised propensity score-fractional dose–response function technique to ascertain the impact of different levels of non-interest income on bank risk. The outcomes underscore the diverse effects of diversification contingent upon factors like bank size and ownership type, including large and small banks as well as public and private sector institutions. Notably, the aftermath of the Global Financial Crisis introduced distinctive dynamics to income diversification's impact. By segmenting the study timeline into two periods—2005–2013 and 2014–2021—it emerges that income diversification lowered bank risk in the earlier period, while conversely amplifying risk in the latter phase. These insights bear significance as an early warning mechanism for bank executives, policymakers, and regulatory authorities, enabling them to navigate strategic transitions associated with non-interest income. Employing a novel approach, this research contributes to the literature by evaluating the interplay between income diversification and bank risk across diverse levels of non-interest income mix. In contrast to conventional econometric methods, the use of the generalised propensity score method stands out as a robust technique to mitigate confounding biases inherent in non-experimental inquiries.

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收入多样化模式及其对银行风险的影响
本研究以印度的公共和私营银行为背景,重点探讨了收入多样化这一重要课题及其对银行风险的影响。研究时间跨度为 2005-2021 年,调查了不同程度的非利息收入对印度银行风险状况的影响。研究采用项目影响评估方法,利用广义倾向得分-分数剂量-反应函数技术来确定不同程度的非利息收入对银行风险的影响。研究结果凸显了多样化对银行规模和所有权类型等因素的不同影响,包括大型银行和小型银行,以及公共部门机构和私营部门机构。值得注意的是,全球金融危机的后果为收入多样化的影响带来了独特的动力。通过将研究时间分为两个阶段--2005-2013 年和 2014-2021 年--可以发现,收入多样化在前期降低了银行风险,而在后期则相反地放大了风险。这些见解对于银行高管、政策制定者和监管机构来说是一种预警机制,使他们能够驾驭与非利息收入相关的战略转型。本研究采用了一种新颖的方法,通过评估不同水平的非利息收入组合中收入多样化与银行风险之间的相互作用,为相关文献做出了贡献。与传统的计量经济学方法相比,使用广义倾向得分法是一种稳健的技术,可减轻非实验调查中固有的混杂偏差。
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来源期刊
CiteScore
3.20
自引率
5.30%
发文量
36
期刊介绍: Australian Economic Papers publishes innovative and thought provoking contributions that extend the frontiers of the subject, written by leading international economists in theoretical, empirical and policy economics. Australian Economic Papers is a forum for debate between theorists, econometricians and policy analysts and covers an exceptionally wide range of topics on all the major fields of economics as well as: theoretical and empirical industrial organisation, theoretical and empirical labour economics and, macro and micro policy analysis.
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