This paper analyzes the relationship between banks’ divergent strategies toward specialization and diversification of …

This paper analyzes the relationship between banks’ divergent strategies toward specialization and diversification of …

The paper focuses on the interaction between the solvency probability of a banking firm and the diversification … achieve a confidence level for solvency, we demonstrate that diversification reduces the amount of equity. Notably, the VaR …

increase prevails through a second channel: an increase in risk shifting. (3) Risk shifting decreases with the diversification …

This paper shows that US banks' increased geographic diversification is an important explanation for the decline of … liquidity. These results suggest that diversification increases liquidity risk-taking capacity in normal times, and that …

, during times of economic policy uncertainty through two economic channels: ‘credit rationing’ and ‘revenue diversification … adverse selection and moral hazard problems leading to higher bank risk. The revenue diversification channel suggests that as …

’s asset. Diversification and leverage in turn determine both idiosyncratic and systemic insolvency risk. We first characterize … contract features both absolute and relative performance evaluation, and it pins down the optimal diversification and leverage … relies too much on relative performance evaluation, which induces an inefficiently high level of diversification, leverage …