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Financial Crisis and Sectoral Diversification of Argentine Banks, 1999-2004

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  • Ricardo Bebczuk y Arturo Galindo
  • Arturo Galindo

Abstract

We explore the impact and evolution of loan portfolio diversification during the 2001-2002 Argentine financial crisis. Using a novel dataset that combines public information on the main activity of the largest 930 Argentine firms with their borrowing from each bank operating in the country during the 1999-2004 period, we find that banks did not modify much their loan portfolio mix as a response to the crisis, even though the econometric results point to a positive effect of sectoral diversification and lending to tradeable sectors on bank profitability and risk mitigation. Our results suggest that larger banks benefit more from diversification that smaller ones, and that the benefits of diversification are greater during the downside of the business cycle.

Suggested Citation

  • Ricardo Bebczuk y Arturo Galindo & Arturo Galindo, 2005. "Financial Crisis and Sectoral Diversification of Argentine Banks, 1999-2004," Department of Economics, Working Papers 060, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    • Handle: RePEc:lap:wpaper:060
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    References listed on IDEAS

    as
    1. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2003. "Bank Concentration and Crises," NBER Working Papers 9921, National Bureau of Economic Research, Inc.
    2. John R. Graham & Michael L. Lemmon & Jack G. Wolf, 2002. "Does Corporate Diversification Destroy Value?," Journal of Finance, American Finance Association, vol. 57(2), pages 695-720, April.
    3. Mr. Gianni De Nicolo & Ms. Mary G Zephirin & Philip F. Bartholomew & Ms. Jahanara Zaman, 2003. "Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk," IMF Working Papers 2003/158, International Monetary Fund.
    4. Andrew Winton, 1999. "Don’t Put All Your Eggs in One Basket? Diversification and Specialization in Lending," Center for Financial Institutions Working Papers 00-16, Wharton School Center for Financial Institutions, University of Pennsylvania.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jahn, Nadya & Memmel, Christoph & Pfingsten, Andreas, 2013. "Banks' concentration versus diversification in the loan portfolio: New evidence from Germany," Discussion Papers 53/2013, Deutsche Bundesbank.
    2. Brent Ambrose & Michael Shafer & Yildiray Yildirim, 2018. "The Impact of Tenant Diversification on Spreads and Default Rates for Mortgages on Retail Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 56(1), pages 1-32, January.
    3. Nadya Jahn & Christoph Memmel & Andreas Pfingsten, 2016. "Banks’ Specialization versus Diversification in the Loan Portfolio," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(1), pages 25-48, April.

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    More about this item

    Keywords

    Focus; Diversification; Bank risk; Bank return.;
    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
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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