Ownership Structure, Supervisory Regulation and the Diversification Effects on Bank Performance

摘要

This study examines the effects of bank diversifying between traditional and non-traditional activities. Using data from 70 countries, we show that diversified banks underperform their specialized peers, which suggests intensified agency problems in diversified banks. We analyze whether dominant owners and supervisory regulation help mitigate these agency problems. Our results show that banks with a dominant owner suffer less from diversification discount than those without a dominant owner. Further, we show that domestic private owners reduce the poor performance of diversification than foreign owners do, but domestic government owner tends to increase the negative effect of diversification. Lastly, we find that restrictions on securities activities weaken the negative diversification performance, but restrictions on insurance and real estate activities further strengthen this negative diversification effect.