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JOURNAL OF ACCOUNTING AND FINANCE

Diversification Channels and Bank Holding Company Performance

Author(s): Chinpiao Liu, Alan Reichert, Dieter Gramlich

Citation: Chinpiao Liu, Alan Reichert, Dieter Gramlich, (2013) "Diversification Channels and Bank Holding Company Performance," Journal of Accounting and Finance, Vol. 13, Iss. 2, pp. 109 - 124

Article Type: Research paper

Publisher: North American Business Press

Abstract:

This paper examines the effects of diversification on the performance of U.S. bank holding companies

across six distinct channels. First, we find that fee income diversification has the strongest favorable

impacts on BHCs’ performance, while off-balance sheet diversification has unfavorable impacts on risk

and fails to contribute to non-money center BHCs’ returns. Second, when the scales of the associated

activities are large enough, the impact of loan portfolio and fee income diversification on accounting

returns changes from favorable to unfavorable, while the impact of security diversification reverses.

Finally, larger BHCs achieve more benefits from single-channel diversification, while multi-channel

diversification appears to benefit small BHCs the most.