Income diversification and risk: Does ownership matter? An empirical examination of Indian banks

Non‐interest Income, Profit, and Risk Efficiencies: Evidence from Commercial Banks in China

“…Non-interest Income, Profit, and Risk Efficiencies mission and fee income does not have a significant impact on profit efficiency, it has a negative and significant effect on risk efficiency, suggesting that for commercial banks in China, business that generates commission and fee income increases risk. In former studies, DeYoung and Roland (2001), DeYoung and Rice (2004), Stiroh and Rumble (2006), Hidayat et al (2012), andPennathur et al (2012) also find an inverse relationship between non-interest income and risk.…”

“…In addition, commission and fee activities could intensify risk, but the effect of engaging in trading income on risk is less distinct. Pennathur et al (2012) find that in India, non-interest income reduces risk for public sector banks but increases risk for private banks.…”

Revenue Diversification, Performance, and Bank Risk: Evidence From Indonesia

“…Going deeper, we look at the impact of revenue diversification for different types of banks based on the ownership structure. Pennathur et al (2012), using data from banks in India, find that foreignowned banks are more diversified while public sectors banks with higher levels of government ownership have lower fee-based activity.…”

Financial Fragility of Banks In Vietnam: The Role of Revenue Diversification and National Governance Quality

“…However, the paper also suggests that diversifying activities may lead to diseconomies and worsen instability if banks do not have such controlling shareholders. Besides, Pennathur, Subrahmanyam and Vishwasrao [38] examine the case of India and find that fee-based activities result in lower risk only for public sector banks but do not have the same effect on private banks. The reason is that although private domestic banks with poor performance and high credit risk tend to diversify more into non-traditional banking, they are unable to compete with public sector banks with lower feebased income and higher brokerage income.…”

“…In the line with other studies on financial fragility or risk of banks, the authors control for bank characteristics such as the natural logarithm of bank"s total assets (SIZE), the ratio of equity to total assets is used as proxy for the level of capital capitalization and control for the relationship between bank fragility and capitalization"s level (EQUITY), the growth of total assets (ASSETGROWTH). According to Pennathur, Subrahmanyam and Vishwasrao [38] and Sissy, Amidu and Abor [6], larger bank and bank with higher EQUITY ratios would have less volatility than other banks; which means it is stable in operation. Meanwhile, banks which rise significantly in total assets may be exposed to more risks and fragilities.…”