Market Power, Revenue Diversification and Bank Stability: Evidence from Selected South Asian Countries

Posted: 26 Apr 2012 Last revised: 20 Jul 2013

See all articles by My Nguyen

My Nguyen

RMIT- School of Economics, Finance and Marketing

Michael T. Skully

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Shrimal Perera

Monash University - Department of Accounting and Finance; Financial Research Network (FIRN)

Date Written: 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.

Keywords: market power, bank stability, revenue diversification, South Asian, Z-score, Lerner Index

JEL Classification: G21, G28, O23

Suggested Citation

Nguyen, My and Skully, Michael T. and Perera, Shrimal, Market Power, Revenue Diversification and Bank Stability: Evidence from Selected South Asian Countries (August 20, 2011). Available at SSRN: https://ssrn.com/abstract=1949550 or http://dx.doi.org/10.2139/ssrn.1949550

My Nguyen (Contact Author)

RMIT- School of Economics, Finance and Marketing ( email )

445 Swanston Street
Melbourne, Victoria 3001
Australia
+61 3 9925 5450 (Phone)

Michael T. Skully

Monash University - Department of Banking and Finance ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
+61 3 9903 2407 (Phone)
+61 3 9903 1443 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Shrimal Perera

Monash University - Department of Accounting and Finance ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

HOME PAGE: http://www.buseco.monash.edu.au/aaf/staff/perera.html

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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