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Geographic loan diversification and bank risk: A cross-country analysis

Author

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  • Tu DQ Le
  • Van TH Nguyen
  • Son H Tran
  • David McMillan

Abstract

This study investigates the geographic loan expansion on bank risk using the aggregate data of 53 countries from 2005 to 2016 using the system generalized method of moments. Our findings show that global expansion tends to increase bank insolvency and reduce bank adjusted-risk-performance. Our findings further indicate loans distributed to advanced markets tend to reduce bank stability while the proportion of loans to other emerging markets and developing countries may have the potential to improve bank solvency and risk-adjusted-performance. As diversification is seen as a necessary strategy to diversify bank risks, bank managers should put more attention to emerging markets.

Suggested Citation

  • Tu DQ Le & Van TH Nguyen & Son H Tran & David McMillan, 2020. "Geographic loan diversification and bank risk: A cross-country analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1809120-180, January.
    • Handle: RePEc:taf:oaefxx:v:8:y:2020:i:1:p:1809120
    DOI: 10.1080/23322039.2020.1809120
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    Cited by:

    1. Oguzhan Ece & Bulent Diclehan Cadirci, 2022. "The Effect of Loan Portfolio Concentration Level on Financial Stability and Performance: A Comparatıve Analysis in Dual Banking System," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 9(2), pages 523-556, July.
    2. Dat T. Nguyen & Tu D. Q. Le & Tin H. Ho, 2021. "Intellectual Capital and Bank Risk in Vietnam—A Quantile Regression Approach," JRFM, MDPI, vol. 14(1), pages 1-15, January.
    3. Kalluru Siva Reddy, 2021. "Are Banks in India Diversified Enough, Geographically, Across States and Economic Sectors?," Review of Development and Change, , vol. 26(1), pages 83-103, June.

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