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Market Power, Revenue Diversification and Bank Stability: Evidence from Selected South Asian CountriesMy NguyenMonash University - Department of Accounting and Finance Michael T. SkullyMonash University - Department of Accounting and Finance; Financial Research Network (FIRN) Shrimal PereraMonash University - Department of Accounting and Finance; Financial Research Network (FIRN) August 20, 2011 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.
Number of Pages in PDF File: 26 Keywords: market power, bank stability, revenue diversification, South Asian, Z-score, Lerner Index JEL Classification: G21, G28, O23 working papers seriesDate posted: April 26, 2012 ; Last revised: October 2, 2012Suggested CitationContact Information
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