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
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.