Effect of Income Diversification on Bank Performance and Risk: Case of Developing Countries

Abstract

With the financial liberalization process of the world economy, banks have tended to engage in different activities instead of just traditional lending activities. While the traditional source of income for banks is interest income, non-interest income has also emerged. Therefore, it has become very important for bank managers, regulators, investors and banks to investigate the relationship between income diversification and banking performance and risk. In this study, the effect of income diversification on bank performance and risk was analyzed using the two-stage System GMM method, using annual data and 352 observations for 22 developing countries between 2005 and 2020. In the findings obtained as a result of the analysis, it was determined that income diversification did not affect the bank performance. However, it is concluded that income diversification reduces financial strength and increases banking risk. While the increase in the economic growth rate increases the bank's performance; increases financial strength and reduces risk.

Keywords

• Income diversification
• bank performance
• banking risk
• economic growth
• system GMM

Gelir Çeşitlendirmesinin Banka Performansına ve Riskine Etkisi: Gelişmekte Olan Ülkeler Örneği

Abstract

Dünya ekonomisinin finansal liberalleşme süreci ile bankalar, sadece geleneksel kredilendirme faaliyetleri yerine farklı faaliyetlerde de bulunmaya yönelmiştir. Bankaların geleneksel gelir kaynağı faiz geliri olmakla birlikte, faiz dışı gelir elde etme durumu da ortaya çıkmıştır. Bundan dolayı banka yöneticileri, düzenleyiciler, yatırımcılar ve bankalar için gelir çeşitlendirmesi ile bankacılık performansı ve riski arasındaki ilişkiyi araştırmak çok önemli bir hale gelmiştir. Bu çalışmada, 22 gelişmekte olan ülkeler için 2005-2020 yılları arasında yıllık veriler ve 352 gözlem kullanılarak, gelir çeşitlendirmesinin banka performansı ve riski üzerindeki etkisi iki aşamalı Sistem GMM yöntemi kullanılarak analiz edilmiştir. Analiz sonucu elde edilen bulgularda, gelir çeşitlendirmesinin banka performansını etkilemediği belirlenmiştir. Fakat gelir çeşitlendirmesinin finansal güçlülüğü azalttığı ve bankacılık riskini artırdığı sonucuna ulaşılmıştır. Ekonomik büyüme oranındaki artış ise banka performansını artırırken; finansal güçlülüğü artırıp riski azaltmaktadır.

Keywords

• Gelir çeşitlendirme
• banka performansı
• bankacılık riski
• ekonomik büyüme
• sistem GMM

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