Abstract
This paper considers the relationship between bank revenue composition and bank risk in Australia, using data drawn from Australian bank confidentialregulatory returns. It is found that those banks with lower levels of non interest income and higher revenue concentration are less risky, contrary tomean-variance portfolio theory but consistent with previous internationalevidence. Decreasing returns to scale in bank risk is found, with resultssuggesting that the major Australian banks have reached the scale point wheresize is risk increasing. Non interest income is found to be risk increasing, butsome evidence is found that trading and investment income may be riskreducing in certain circumstances, particularly when bank specialisationeffects are considered. It is also suggested that care must be taken whenselecting the appropriate peers for performance benchmarking, asinstitutionally based peer analysis is likely to be misleading unless bankspecialisation is considered.
Original language | English |
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Title of host publication | 25th Australasian Finance & Banking Conference |
Place of Publication | Sydney |
Publisher | Social Science Electronic Publishing |
Pages | 1-33 |
Number of pages | 33 |
ISBN (Print) | 9780987312747 |
DOIs | |
Publication status | Published - 2012 |
Externally published | Yes |
Event | 25th Australasian Finance and Banking Conference 2012 - Sydney, Sydney, Australia Duration: 16 Dec 2012 → 18 Dec 2012 |
Conference
Conference | 25th Australasian Finance and Banking Conference 2012 |
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Country/Territory | Australia |
City | Sydney |
Period | 16/12/12 → 18/12/12 |