| Paper Number | KCB-WP-2015-013 |
|---|---|
| Title | Reassessment of Diversification Effects in U.S. Bank Holding Companies: A Quantile Regression Approach |
| Title(Other) | |
| Author | Jinyong Kim ; Yong-Cheol Kim |
| Publisher | |
| Abstract | Heterogeneous patterns of the diversification effects are identified across the full distributions of various risk-adjusted performance measures and over time using a quantile regression of U.S. bank holding company data for the period 2000?2010. The net effect of income diversification is determined by a positive indirect effect from a diversified income structure and a negative direct effect from an increased share of non-interest income. The first main empirical finding shows a greater discount in the upper quantiles of the performance distributions. Second, the net diversification effect changes from a discount to a premium over time. These findings suggest that the diversification discount reflects a loss of comparative advantage at the early adjustment stage of income diversification. However, after the costly adjustment, the diversification benefit becomes dominant and the net effect becomes a diversification premium. |
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