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We determine whether and how functional diversification affects the market-based long-term performance and risk profile of banks. Using a sample of listed banks from 11 Eurozone countries, we test the effects of revenue and asset diversification on bank franchise values and riskiness. Our results show that revenue diversification does not affect franchise values but does increase riskiness while concentration on loans does not affect riskiness but adversely affects franchise values.

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How Do Stock Markets Value Bank Diversification? Evidence from the Eurozone

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  • 发表日期：

    2025年

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  • Shaker Ahmed,
  • Laura Baselga-Pascual,
  • Timothy King

摘要

We determine whether and how functional diversification affects the market-based long-term performance and risk profile of banks. Using a sample of listed banks from 11 Eurozone countries, we test the effects of revenue and asset diversification on bank franchise values and riskiness. Our results show that revenue diversification does not affect franchise values but does increase riskiness while concentration on loans does not affect riskiness but adversely affects franchise values.