Australian Specific Bank Features and the Impact of Income Diversification on Bank Performance and Risk

45 Pages Posted: 14 Mar 2014

See all articles by Piyadasa Edirisuriya

Piyadasa Edirisuriya

Monash University; Financial Research Network (FIRN)

Abey Gunasekarage

Monash University; Monash University

Michael J. Dempsey

Ton Duc Thang University (TDTU)

Multiple version iconThere are 2 versions of this paper

Date Written: December 5, 2013

Abstract

As an outcome of financial deregulation, commercial banks have significantly diversified from a domestic dependence on simple interest-bearing loans to a broader range of financial services across international markets. Such initiatives have transformed the structure of the Australian banking industry and are destined to receive scrutiny following the announcement of Australia’s financial services inquiry. Against the view that attempts by firms to diversify can be expected to impact negatively on financial performance, we find no evidence to suggest that diversification has been detrimental to the performance of Australian banks. It appears, rather, that Australia’s banks have improved their risk-return revenue streams as an outcome of diversification. We confirm our findings with both accounting and market measures of performance.

Keywords: Diversification; Australian banks; Bank performance; Market performance

JEL Classification: G10; G20; G21

Suggested Citation

Edirisuriya, Piyadasa and Gunasekarage, Abeyratna and Dempsey, Michael J., Australian Specific Bank Features and the Impact of Income Diversification on Bank Performance and Risk (December 5, 2013). Available at SSRN: https://ssrn.com/abstract=2408288 or http://dx.doi.org/10.2139/ssrn.2408288

Piyadasa Edirisuriya (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Financial Research Network (FIRN)

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

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

Abeyratna Gunasekarage

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Michael J. Dempsey

Ton Duc Thang University (TDTU) ( email )

District 7
Ho Chi Minh City, 3001
Vietnam

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