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Does Bank Diversification Affect Funding Cost? Evidence from the U.S. Banks

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  • Dung Viet Tran

    (Saigon International School of Business, Banking University Ho Chi Minh City, 36 Ton That Dam Str., Ho Chi Minh City 700000, Vietnam)

Abstract

We investigate how diversification affects the U.S. bank holding companies’ funding cost. We document consistent evidence of a lower deposit rates for banks that engage more in non-traditional banking activities. The quantile regressions which dissect the behaviour of banks at the right tail of deposits costs distribution, point out the leveraged effect of diversification is more pronounced with lower-deposits costs banks. The study also suggests diversified banks enjoy lower funding cost during the crisis. Our study is of interest to regulators and policymakers.

Suggested Citation

  • Dung Viet Tran, 2020. "Does Bank Diversification Affect Funding Cost? Evidence from the U.S. Banks," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 16(1), pages 87-107.
    • Handle: RePEc:usm:journl:aamjaf01601_87-107
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    References listed on IDEAS

    as
    1. Jimenez, Gabriel & Saurina, Jesus, 2004. "Collateral, type of lender and relationship banking as determinants of credit risk," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2191-2212, September.
    2. Saunders, Anthony & Walter, Ingo, 1994. "Universal Banking in the United States: What Could We Gain? What Could We Lose?," OUP Catalogue, Oxford University Press, number 9780195080698.
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    Cited by:

    1. Dung viet Tran & Trung duc Nguyen & Chi huu Lu, 2021. "Does the dividend policy signal quality? Investigation on the bank funding costs, and market discipline," Economics Bulletin, AccessEcon, vol. 41(3), pages 2029-2040.
    2. Tran, Dung Viet & Hussain, Nazim & Nguyen, Duc Khuong & Nguyen, Trung Duc, 2024. "How do depositors respond to banks' discretionary behaviors? Evidence from market discipline, deposit insurance, and scale effects," International Review of Financial Analysis, Elsevier, vol. 93(C).

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