Diversification and bank stability

摘要

This paper tests the theory of Wagner (2010) 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. (C) 2020 Elsevier B.V. All rights reserved.