Bank diversification, performance, and corporate governance: evidence from China

Liang, Hsin-Yu; Kuo, Liang-wei; Chan, Kam C.; Chen, Sheng‐Hung

doi:10.1080/16081625.2018.1452618

Cited by 21 publications

(9 citation statements)

References 19 publications

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“…Therefore, this study explored the extent to which the CEOs' involvement in such meetings influences firm performance. In line with earlier studies on the effect of corporate governance on firm performance (Liang, Kuo, Chan, & Chen, 2020;Liu, 2019), this study took the view that CEOs' involvement in top management meetings mitigates the negative effect of diversification on firm performance.…”

Section: Ceo Commitmentmentioning

confidence: 95%

Diversification, Ceo Commitment, and Firm Performance

Silalahi¹,

Dwinanto²

2021

DRMJ

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but it is apparent that the impact of diversification still generates much debate given the mixed findings (Palich et al., 2000;Volkov & Smith, 2015). Some studies revealed that implementing a diversification strategy can adversely the performance affect (Zhou, 2011;Hashai, 2015;Gyan, 2017), which is in contrast to other studies that pinpointed how diversification strategies actually can improve the company performance (Kuppuswamy & Villalonga, 2016;Chan, Bany-Ariffin, and Nasir, 2019).One of the factors causing the differing research results is the use of variables that moderate the relationship between diversification and company performance (de Andrés, Fuente, & Velasco, 2017). Among these factors is corporate governance, which includes the level of supervision and chief executive officer (CEO) performance (Jara-Bertin, 2015). In particular, diversification can cause a company's organizational structure to expand, which leads to higher information asymmetry. Such an issue poses great difficulty for coordination and supervision (Bushman, Chen, Engel, & Smith, 2004; Rodríguez-Pérez & Van Hemmen, 2010), decreasing the company's performance.The increasingly complex coordination in companies with a broader organizational structure makes it vital to establish an effective coordina-This study examined the effect of diversification strategies on firm performance and the extent to which the chief executive officer (CEO) commitment moderates this relationship. The effect of diversification on firm performance was analyzed in a sample with both above-average and below-average diversification levels. The sample consisted of 76 manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2007 to 2018, which were analyzed using panel data regression with a balanced panel. Tobin's Q was utilized to measure firm performance, compounded with three measures of diversification strategies: entropy index, Herfindahl index, and the number of segments. The results show that diversification leads to lower firm performance, whereas CEO commitment eliminates the negative influence of diversification on company performance in all measurement models (i.e., entropy, Herfindahl index, and the number of segments). Accordingly, the negative effect of diversification strategies and consistent CEO commitment were observed among the samples with high and low diversification levels.

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Section: Ceo Commitmentmentioning

confidence: 95%

Diversification, Ceo Commitment, and Firm Performance

Silalahi¹,

Dwinanto²

2021

DRMJ

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“…The relationship between income diversification and bank performance has been empirically analyzed primarily for developed economies such as USA and European Unions (Acharya et al, 2006;Brighi and Venturelli, 2014;Chen and Kao, 2014;Chen and Lai, 2017;Chronopoulos et al, 2011;Deng and Elyasiani, 2008;DeYoung and Roland, 2001;Edirisuriya et al, 2015;Elsas et al, 2010;Elyasiani and Wang, 2012;Goddard et al, 2008;Huang and Chen, 2006;Jouida et al, 2017;Klein and Saidenberg, 2010;Köhler, 2014;Laeven and Levine, 2007;Lepetit et al, 2008;Mercieca et al, 2007;Rime and Stiroh, 2003;Schmid and Walter, 2009;Stiroh, 2004;Stiroh and Rumble, 2006) and developing economies such as Brazil (Tabak et al, 2011), China (Berger et al, 2010;Li and Zhang, 2013;Liang et al, 2018;Meng et al, 2018;Nguyen and Nghiem, 2016;Zhou, 2014), India (Nguyen and Nghiem, 2016; Bank performance in India Pennathur et al, 2012;Sarkar, 2016;Sharma and Anand, 2018;Trivedi, 2015), Malaysia (Brahmana et al, 2018;Nguyen, 2018), Philippines (Meslier et al, 2014;Nguyen, 2018) and Vietnam (Nguyen, 2018;…”

Section: Empirical Literaturementioning

confidence: 99%

“…A Vietnamese study by Minh Sang (2017) found that income diversification has positive impact on technical efficiency of 34 banks over the period 2007-2015. Using a sample of listed Chinese banks, Liang et al (2018) reported that income diversification improved accounting performance but decreased operating efficiency and market valuation because of diversification-induced agency cost.…”

Section: Empirical Literaturementioning

confidence: 99%

Dynamics of income diversification and bank performance in India

Vidyarthi

2019

JFEP

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Purpose The purpose of this paper is to examine the dynamics between income diversification and performance (cost, profit, revenue, technical, pure technical and scale efficiency) for 38 listed Indian banks within panel data framework during the period 2004-2005 to 2015-16. Design/methodology/approach This study computes bank’s cost, profit, revenue, technical, pure technical and scale efficiency within intermediation approach with data envelopment analysis (DEA) as a performance indicator, followed by exploring the association between income diversification and bank performance using truncated Tobit regression within panel data framework. Findings Tobit regression results revealed inverted U-shaped relationship between the income diversification and estimated efficiency parameters for the overall panel. Size and bank intermediation ratio seems to be a major factor in exploiting the potential benefits of income diversification. The author reconfirmed the inverted U-shaped relationship with these efficiency parameters for exclusive subsamples consisting of government-owned and private sector banks. Research limitations/implications Inverted U-shaped relationship between the income diversification and estimated efficiency parameters suggest that banks should go for limited diversification to improve performance. Thus, regulators and banks should pursue limited diversification strategy for improving banking efficiency. Originality/value This study computes bank performance (cost, profit, revenue, technical, pure technical and scale efficiency) based on DEA followed by exploring the association between performance and income diversification for 38 Bombay stock exchange listed banks.

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“…[1], Ліанг Н. [2], Ван В. [3] в своїх дослідженнях акцентують увагу, на систематизації підходів до діяльності корпорацій в зовнішньому інституційному середовищі та пропонують критерії визначення корпорації такі як: форма власності, порядок реєстрації корпорацій, розподіл активів і пасивів, структура підприємства, управління і контроль, ступінь централізації та вид діяльності за кордоном.…”

Section: National University Of Water and Environmental Engineeringunclassified

Ontological approaches of corporations’ activities in the external institutional environment

Valiullina¹

2018

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Bank diversification, performance, and corporate governance: evidence from China

Cited by 21 publications

References 19 publications

Diversification, Ceo Commitment, and Firm Performance

Diversification, Ceo Commitment, and Firm Performance

Dynamics of income diversification and bank performance in India

Ontological approaches of corporations’ activities in the external institutional environment

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