Banks’ Specialization Versus Diversification in the Loan Portfolio New Evidence from Germany

Schmalenbach Business Review (2016) 17:25–48

Posted: 12 May 2016

See all articles by Nadya Jahn

Nadya Jahn

Institut für Kreditwesen

Christoph Memmel

Deutsche Bundesbank

Andreas Pfingsten

University of Münster - Finance Center Münster

Date Written: May 12, 2016

Abstract

Do banks with a specialized credit portfolio have superior selection and monitoring abilities? Controlling for the composition of the banks’ loan portfolios, we show that specialized banks have lower loan loss rates. We also see that for more focused German banks in our sample period 2003–2011 the standard deviation of loan loss rates seems to be lower. Moreover, the loan loss rate of a given industry in a bank‘s loan portfolio is lower if the bank has a major exposure to that industry.

Keywords: Loan portfolio, Credit risk, Loan losses, Specialization

JEL Classification: G11, G21, C23, C43

Suggested Citation

Jahn, Nadya and Memmel, Christoph and Pfingsten, Andreas, Banks’ Specialization Versus Diversification in the Loan Portfolio New Evidence from Germany (May 12, 2016). Schmalenbach Business Review (2016) 17:25–48, Available at SSRN: https://ssrn.com/abstract=2779012

Nadya Jahn

Institut für Kreditwesen ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany

Christoph Memmel (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Andreas Pfingsten

University of Münster - Finance Center Münster ( email )

Universitätsstr. 14-16
Muenster, D-48143
Germany

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