Title: Diversification, bank risk taking and performance: evidence from Tunisian banks

Authors: Khadija Mnasri, Ezzeddine Abaoub

Addresses: Faculty of Economics and Management Sciences, Campus Universitaire Tunis – Boulevard 7 Novembre, El Manar, BP 1060 Tunis, Tunisie. ' Faculty of Economics and Management Sciences, Campus Universitaire Tunis – Boulevard 7 Novembre, El Manar, BP 1060 Tunis, Tunisie

Abstract: In this paper, we carry out an empirical study for the Tunisian market to shed light on the question whether the observed shift into non-interest income activities improves performance of commercial banks. Our main results can be summarised in three statements: banks diversified across both interest and non-interest income generating activities have higher levels of raw share returns than those focusing their activities; focusing into non-interest generating activities decreases market profitability of banks; banks that are functionally diversified also experience higher relative levels of systematic risk while the effect on the idiosyncratic risk component is non-significant.

Keywords: portfolio theory; product diversification; interest income; non-interest income; banks; banking; Tunisia; systematic risk; performance; panel data; share returns; market profitability; idiosyncratic risks; monetary economics; finance.

DOI: 10.1504/IJMEF.2010.030034

International Journal of Monetary Economics and Finance, 2010 Vol.3 No.1, pp.13 - 32

Published online: 03 Dec 2009 *

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