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Does bank income diversification affect systemic risk: New evidence from dual banking systems

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  • Maghyereh, Aktham Issa
  • Yamani, Ehab

Abstract

In this article, we examine the influence of income diversification on systemic risk, using quarterly data from 42 publicly traded banks operating across six Gulf Cooperation Council (GCC) countries over the period from January 2008 to December 2020. Our main finding is that diversification decreases systemic risk, and such effect is stronger in Islamic banks compared to their conventional counterparts. We also find that the COVID-19 pandemic equally affected Islamic and conventional banks. These findings are robust to various measures of diversification and systemic risk.

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  • Maghyereh, Aktham Issa & Yamani, Ehab, 2022. "Does bank income diversification affect systemic risk: New evidence from dual banking systems," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322001180
    DOI: 10.1016/j.frl.2022.102814
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    Cited by:

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    2. Minzhi Wu & Emili Tortosa-Ausina & Paula Cruz-García, 2024. "The impact of diversification on the profitability and risk of Chinese banks: evidence from a semiparametric approach," Empirical Economics, Springer, vol. 67(6), pages 2565-2606, December.
    3. Duong Thuy Phan & Trong Tai Nguyen & Thi Thanh Hoang, 2022. "Impact of income diversification on the business performance of Vietnamese commercial banks," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2132592-213, December.
    4. Maghyereh, Aktham & Abdoh, Hussein, 2024. "Tail risk connectedness among GCC banks episodes from the Global Financial Crisis to COVID-19 pandemic," The Quarterly Review of Economics and Finance, Elsevier, vol. 96(C).
    5. Maghyereh, Aktham & Abdoh, Hussein & Al-Shboul, Mohammad, 2022. "Oil structural shocks, bank-level characteristics, and systemic risk: Evidence from dual banking systems," Economic Systems, Elsevier, vol. 46(4).

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