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 …

of greater diversification in terms of higher monitoring dominates the costs of free-riding and duplication of efforts …

’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 …

The paper examines whether bank diversification in multiple dimensions can protect bank lending from uncertainty shocks … significantly alleviated by bank diversification in the loan portfolio, income, and funding aspects. Our findings offer practical … implications for regulators and banks themselves: bank diversification can effectively act as a lending shock absorber in periods …