Article ID Journal Published Year Pages File Type
5090355 Journal of Banking & Finance 2009 9 Pages PDF
Abstract
The aim of this paper is to analyze how diversification of banks across size and industry affects risk, cost and profit efficiency, and bank capitalization for large Austrian commercial banks over the years 1997-2003. Employing a unique dataset, provided by the Austrian Central Bank, we test for several different types of managerial hypotheses, formalized according to a modified version of the Berger and DeYoung model [Berger, A.N., DeYoung, R., 1997. Problem loans and cost efficiency in commercial banks. Journal of Banking and Finance 21, 849-870]. We find that, although diversification negatively affects cost efficiency, it increases profit efficiency and reduces banks' realized risk. Finally, diversification seems to have a positive impact on banks' capitalization.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, , ,