Geographic Loan Diversification and Bank Risk: A Cross-Country Analysis

Cogent Economics & Finance (2020), 8: 1809120

20 Pages Posted: 15 Nov 2020

See all articles by Tu Le

Tu Le

Vietnam National University - Ho Chi Minh City (VNU-HCM) - University of Economics and Law

Date Written: August 17, 2020

Abstract

This study investigates the geographic loan expansion on bank risk using the aggregate data of 53 countries from 2005 to 2016 using the system generalized method of moments proposed by Arellano and Bover (1995). Our findings show that global expansion tends to increase bank insolvency and reduce bank adjusted-risk-performance. Our findings further indicate loans distributed to advanced markets tend to reduce bank stability while the proportion of loans to other emerging markets and developing countries may have the potential to improve bank solvency and risk-adjusted-performance. As diversification is seen as a necessary strategy to diversify bank risks, bank managers should put more attention to emerging markets.

Keywords: Geographic loan diversification; bank stability; adjusted-risk-performance; global banking system

JEL Classification: G21, G28

Suggested Citation

Le, Tu, Geographic Loan Diversification and Bank Risk: A Cross-Country Analysis (August 17, 2020). Cogent Economics & Finance (2020), 8: 1809120, Available at SSRN: https://ssrn.com/abstract=3701601

Tu Le (Contact Author)

Vietnam National University - Ho Chi Minh City (VNU-HCM) - University of Economics and Law ( email )

Vietnam National University - Ho Chi Minh City
Linh Xuan Ward, Thu Duc
Ho Chi Minh City
Vietnam

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
14
Abstract Views
275
PlumX Metrics