Diversification in Korean Banking Business: Is Noninterest Income a Financial Savior?

Journal of Emerging Market Finance, Forthcoming

29 Pages Posted: 5 Jun 2017 Last revised: 8 Jun 2017

See all articles by Seungho Baek

Seungho Baek

City University of New York - Department of Finance

Kwan Yong Lee

University of North Dakota - College of Business & Public Administration

Jeong Lee

University of North Dakota

Sunil Mohanty

City University of New York - Department of Finance

Date Written: May 30, 2016

Abstract

This paper examines whether the diversification of operating income in Korean banks has persistently enhanced the performance of Korean banks. The results show that, despite Korean banks’ efforts to diversify their operating income, these banks do not gain any benefit from the diversification. Thus, bank managers in Korea focus on interest income revenue. The results also show that the increase in non-interest income revenue keeps pace with the growth in expenses, which offsets the diversification effect on the performance of Korean banks. As a result, Korean banks discourage banking diversification and focus on non-interest income revenues.

Keywords: Banking; Non-interest income; Diversification; Risk

JEL Classification: G21

Suggested Citation

Baek, Seungho and Lee, Kwan Yong and Lee, Jeong and Mohanty, Sunil, Diversification in Korean Banking Business: Is Noninterest Income a Financial Savior? (May 30, 2016). Journal of Emerging Market Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2977590 or http://dx.doi.org/10.2139/ssrn.2977590

Seungho Baek (Contact Author)

City University of New York - Department of Finance ( email )

2900 Bedford Avenue
Brooklyn, NY 11210
United States

Kwan Yong Lee

University of North Dakota - College of Business & Public Administration ( email )

Department of Economics
293 Centennial Drive Stop 8369
Grand Forks, ND 58202-8369
United States
701-777-3357 (Phone)

Jeong Lee

University of North Dakota ( email )

Box 8366
Grand Forks, ND 58202
United States

Sunil Mohanty

City University of New York - Department of Finance ( email )

2900 Bedford Avenue
Brooklyn, NY 11210
United States

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