Diversification and bank stability

Shuo Liang, Fernando Moreira, Joosung Lee

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

This paper tests a theory in the literature regarding the role of diversification in bank systemic risk and investigates whether this effect is different for bank standalone risk. We innovatively construct a country-level diversification measure to capture the risk distribution among banks. Based on a large dataset consisting of 1,346 international publicly listed banks from 49 countries from 1998 to 2018, our results confirm existing theoretical conclusions that higher diversification leads to more systemic risk and less bank standalone risk.
Original languageEnglish
Article number109312
JournalEconomics Letters
Early online date13 Jun 2020
Publication statusE-pub ahead of print - 13 Jun 2020

Keywords / Materials (for Non-textual outputs)

  • country-level diversification
  • idiosyncratic risk
  • systemic risk

Cite this