Abstract
Faced with intense competition, banks may find geographic and income diversification strategies indispensable to remain competitive. Surprisingly, the literature has only discussed the two strategies separately, and there appears little effort in considering both strategies simultaneously, at least in the investigation of their intertwined impact on bank performance. We adopt System Generalized Method of Moments for a panel dataset covering commercial banks in Vietnam to investigate the impact of these diversification strategies on bank performance. The research findings suggest that multimarket contact has a positive impact on performance, supporting the mutual forbearance hypothesis. Income diversification is also positively related to bank profitability. Importantly, our results show that the interaction between multimarket contact and income diversification has a negative effect on bank profitability. This evidence implies that facing with multimarket contacts, a bank with diversified businesses is more likely to choose to compete, thus raising the competition and lowering its profitability.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: International Journal of the Economics of Business
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.