guarantees could also amplify a moral hazard problem that induces large banks to take excessive risk. If such risk is mispriced … diversification index to account for complexity, we find robust evidence consistent with mispricing among the most diversified large …

Conventional wisdom in banking argues that diversification tends to reduce bank risk and improve performance, but the … recent financial crisis suggests that aggressive diversification strategies may have resulted in increased risk taking and … diversification strategies and the risk-return tradeoff in banking. Our data set covers Russian banks during the 1999-2006 period and …

the context of banks diversifying into the other bank's asset, which may potentially intensify a systemic risk. The … central results of the paper are as follows. When creditors punish the bank's excessive risk exposure by demanding higher risk … premium, the bank owners' optimal diversification will coincide with the diversification that maximizes the combined value of …