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Market power, revenue diversification and bank stability: Evidence from selected South Asian countries

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  • Nguyen, My
  • Skully, Michael
  • Perera, Shrimal

Abstract

We investigate the association between bank market power and revenue diversification and whether revenue diversification interacts with market power impacting on individual bank stability. These issues are explored in the context of four South Asian banking markets (Bangladesh, India, Pakistan and Sri Lanka) during 1998–2008. Our Generalised Methods of Moments (GMM) estimators indicate that South Asian banks with greater market power focus more on traditional interest income generating activities. Such banks, however, become more stable when they diversify across both interest- and non-interest income activities.

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  • Nguyen, My & Skully, Michael & Perera, Shrimal, 2012. "Market power, revenue diversification and bank stability: Evidence from selected South Asian countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 897-912.
    • Handle: RePEc:eee:intfin:v:22:y:2012:i:4:p:897-912
    DOI: 10.1016/j.intfin.2012.05.008
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    More about this item

    Keywords

    Market power; Bank stability; Revenue diversification; South Asian; Lerner index;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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