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How functional and geographic diversification affect bank profitability during the crisis

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  • Brighi, Paola
  • Venturelli, Valeria

Abstract

Using bank-level data on 491 Italian banks over the period 2006–2012, we investigate the impact of functional and geographic diversification on bank performance during 2008’s financial and 2010’s sovereign debt crises. Both scenarios negatively affect bank profitability while discordant effects emerge in case of the Z-Score analysis. Italian banks’ risk stays unaffected by the 2008’s episode, while the sovereign debt crisis increases such risk. Results differ for the sample of mutual and not-mutual banks being the different banking groups characterized by different size and business models.

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  • Brighi, Paola & Venturelli, Valeria, 2016. "How functional and geographic diversification affect bank profitability during the crisis," Finance Research Letters, Elsevier, vol. 16(C), pages 1-10.
    • Handle: RePEc:eee:finlet:v:16:y:2016:i:c:p:1-10
    DOI: 10.1016/j.frl.2015.10.020
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    More about this item

    Keywords

    Financial crisis; Bank heterogeneity; Diversification; Geography; Panel data;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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