Why Banks Want to Be Complex

Fabrizio Spargoli, Frank Hong Liu, Lars Norden

Research output: Contribution to conferencePaperAcademic

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Abstract

We investigate whether and how bank complexity affects performance and systemic risk. We base the analysis on a complexity measure that captures diversification and diversity, controlling for size and other bank characteristics. We find that more complex banks exhibit a higher profitability, lower risk, and higher market share. Moreover, we show an inversely U-shaped relation between bank complexity and banks’ sensitivity to systemic shocks. The evidence challenges the view that higher bank complexity is per se bad and is consistent with theoretical models that show that diversity in the banking system is critical for financial stability.
Original languageEnglish
Publication statusIn preparation - 2016
EventThe Allied Social Science Associations Annual Meeting - San Francisco, United States
Duration: 3 Jan 20165 Jan 2016
https://www.aeaweb.org/conference/2016/preliminary.php

Conference

ConferenceThe Allied Social Science Associations Annual Meeting
Abbreviated titleASSA
Country/TerritoryUnited States
CitySan Francisco
Period3/01/165/01/16
Internet address

Research programs

  • RSM F&A

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