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
Date Written: May 30, 2016
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: Suggested Citation