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Purpose – In this article, the research objective is to empirically investigate the effect of the adoption of the Brazilian instant payment system, Pix, on the local credit market structure and the diversification of the banking system in Brazilian municipalities. Design/methodology/approach – By analyzing the data, in this study, we compile and align data from supervisory and public sources, covering the period from 2019 to 2022 in Brazil. As of 2014, Brazil was comprised of 5568 municipalities distributed across five regions: North (450 municipalities), Northeast (1792), Midwest (467), Southeast (1668) and South (1191), according to the Brazilian Institute of Geography and Statistics (IBGE). Our analysis relies on the volume and quantity of Pix to the outstanding credit operations in Brazil. Findings – This article provides evidence that the widespread adoption of Pix has impacted the financial structure of municipalities. This analysis of banking concentration in the country and municipalities, based on banking relationships, helped us assess whether the adoption of Pix had any correlation with the increase in credit lines. Overall, the results from the statistical tables suggest that the adoption of Pix may be having a positive impact on the local credit market structure. Originality/value – The originality contribution of the study is to initiate an investigation into the impact of this instant payment system, Pix, on the Brazilian reality. Pix was launched in 2020, amid the COVID-19 pandemic, and had significant numbers, such as over 61% of the adult population having at least one Pix key registered in a little over a year; about 100 million people made at least one payment with Pix; and more than 1.4 billion transactions per month, with 72% between individuals, as presented by the REB 2021.

This paper explores the impact of market competition on banks' diversification strategies. Through a unique sample of Vietnamese commercial banks during 2007 to 2021, our most important finding is that the bank competition impact may depend on the specific type of diversification under analysis. Specifically, we document that banks are more likely to diversify their asset portfolios and income sources into non-lending activities and non-interest revenues amid high competition. In contrast, loan portfolios of banks facing more competition tend to be less diversified across different economic sectors. Besides, funding diversity in another vein may not react to changes in the banking market structure. Further empirical results reveal that the influence of market competition on bank business models is more pronounced at smaller and riskier banks, suggesting that a competitive market places greater pressure on more vulnerable banks and causes them to adopt a more aggressive diversification strategy. Based on these findings, critical policy implications include the development of frameworks to guide banks' activity diversification strategies, monitoring sectoral concentration risks, and providing targeted support and guidance for specific groups of banks, particularly smaller and riskier institutions, within a competitive banking environment. Plain language summary: The impact of market competition on bank diversification strategies This paper explores the impact of market competition on banking diversification strategies. We simultaneously incorporate structural (market concentration) and non-structural approaches to establish the measurement of competition, as any analysis relying on only one competition measure could be misleading. Unlike prior research, we comprehensively analyze different dimensions of bank diversification from asset, funding, income, and sectoral loan portfolios. Through a unique sample of Vietnamese commercial banks from 2007 to 2021, our most important finding is that the bank competition impact may depend on the specific type of diversification under analysis. Specifically, we document that banks are more likely to diversify their asset portfolios and income sources into non-lending activities and non-interest revenues amid high competition. In contrast, loan portfolios of banks facing more competition tend to be less diversified across different economic sectors. Besides, funding diversity in another vein may not react to changes in the banking market structure. Our results not only survive after alternative econometric strategies and subsample analysis but are also robust to a series of modifications in the bank diversification and competition measurements. We further ask whether bank-level heterogeneity matters to the impact of market competition on bank diversification. The empirical results reveal that the influence of market competition on bank business models is more pronounced at smaller and riskier banks, suggesting that a competitive market places greater pressure on more vulnerable banks and causes them to adopt a more aggressive diversification strategy. [ABSTRACT FROM AUTHOR]

The paper explores the impact of bank diversification on earnings opacity. We aim at offering a comprehensive analysis by focusing on four dimensions of diversification: income, assets, funding, and loan portfolios. Using data from Vietnam over the period 2007–2022, we document consistent and robust evidence that increased diversification across all forms mitigates earnings management via discretionary loan loss provisions. To shed further light on this pattern, we examine how the banking complexity and opacity nexus varies with multiple measures of bank competition. We find that more intense competition in the banking system likely accentuates the impact of diversification on bank earnings manipulations. Our findings provide important implications related to bank business models and banking market structures in the era of financial deregulation and innovation.

We examine the effect of a chief executive officer (CEO)'s expertise power on bank diversification. Using US bank data from 1990 to 2020, we find that a CEO's expertise power is positively associated with bank diversification. Market competition and board composition (size and independence) positively affect this relationship. We also find that CEO delta and vega are the underlying mechanisms through which expertise power leads to greater diversification. We address endogeneity concerns using the two‐stage least squares, Heckman estimation and the difference‐in‐differences approaches and check result robustness in several ways. We provide a new explanation for bank diversification that is useful for policymakers in developing a bank strategy concerning CEO behaviour in diversification. [ABSTRACT FROM AUTHOR]

The purpose of the study is to investigate whether bank diversification influences borrowing firms' financial constraints on investment decisions. It also analyzes whether the different dimensions of bank diversification could alleviate financial constraints to firm investment. Further, the role of bank diversification in achieving firm financial sustainability is explored. By applying the Two-step System GMM, this study examines the effect of changes in bank diversification on financial constraints to borrowing firm investment in a reduced-form investment model with a sample of 810 listed firms in Taiwan over the period 1997–2019. The empirical findings indicate that firms are financially constrained as well as there being a positive relationship between cash flow and investment among Taiwanese listed firms. Additionally, bank diversification significantly reduces the investment-cash flow sensitivity of firms, suggesting that bank diversification mitigates the financial constraints to borrowing firms. Moreover, the multi-diversification of a bank compared to single-diversification will have greater impact on mitigating the firms' financial constraints on investment. Thus, bank diversification strategies are proposed in a bank-based financial system, leading to the easing of the borrowing firms' financial constraints to investments. [ABSTRACT FROM AUTHOR]

Purpose ─ The paper empirically explores the conditioning role of loan portfolio diversification in the monetary policy pass-through via the bank lending and risk-taking channels. Methods ─ Data of Vietnamese commercial banks during 2007–2019 is employed to perform regression using the two-step system generalized method of moments in dynamic panel models. For robustness, we approach different choices of monetary policy indicators, ranging from interest-based tools to quantitative-based policy, and consider a rich set of sectoral exposure measures to proxy loan portfolio diversification. Findings ─ Lower interest rates or greater liquidity injection during monetary expansion may increase bank lending and bank risk, thus confirming the working of the bank lending and risk-taking channels of monetary policy transmission. Notably, the potency of these banking channels may be weakened for banks diversifying loan portfolios more into various economic sectors. Implication ─ The findings call for monetary authorities to concentrate on certain types of banks, depending on their loan portfolios when setting monetary policy. When managing banking supervision, banking supervisors should also acknowledge the tradeoff between bank lending and bank risk in response to monetary shocks. Originality ─ For the first time, this paper explores the conditional role of loan portfolio composition and thus further supports the recent upsurge in empirical studies highlighting the role of business models in monetary policy pass-through.

Purpose ─ The paper empirically explores the conditioning role of loan portfolio diversification in the monetary policy pass-through via the bank lending and risk-taking channels. Methods ─ Data of Vietnamese commercial banks during 2007–2019 is employed to perform regression using the two-step system generalized method of moments in dynamic panel models. For robustness, we approach different choices of monetary policy indicators, ranging from interest-based tools to quantitative-based policy, and consider a rich set of sectoral exposure measures to proxy loan portfolio diversification. Findings ─ Lower interest rates or greater liquidity injection during monetary expansion may increase bank lending and bank risk, thus confirming the working of the bank lending and risk-taking channels of monetary policy transmission. Notably, the potency of these banking channels may be weakened for banks diversifying loan portfolios more into various economic sectors. Implication ─ The findings call for monetary authorities to concentrate on certain types of banks, depending on their loan portfolios when setting monetary policy. When managing banking supervision, banking supervisors should also acknowledge the tradeoff between bank lending and bank risk in response to monetary shocks. Originality ─ For the first time, this paper explores the conditional role of loan portfolio composition and thus further supports the recent upsurge in empirical studies highlighting the role of business models in monetary policy pass-through. [ABSTRACT FROM AUTHOR]

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We investigate the relationship of Indonesian bank diversification towards its long term performance and risk profile with Indonesian bank data from 2009 to 2013. Non-interest income to total operating income of the bank measures its bank diversification level. Bank value is measured by the adjusted Tobin's Q and risk profile which is broken down into total risk, idiosyncratic risk, and systematic risk. The result shows that bank non-interest income diversification has a positive influence on its franchise value. There is, however, no strong evidence that diversification can lower a bank's risk profile.

Even though commercial banks have gradually followed the diversification strategy and deeply penetrated into non-traditional businesses for further income sources, studies on potential diversification benefits provide mixed results. This paper investigates how stock market values bank diversification using a data set of Vietnamese listed banks for the period 2006–2014. Overall, we find a negative relationship between bank diversification and stock market valuation. This implies investor preference for banks focusing on traditional activities. [ABSTRACT FROM AUTHOR]

We examine the impact of the international diversification of banks on the value of their advice in 1,705 cross-border merger and acquisition (M&A) transactions. We find that bidders engaging internationally diversified advisors face lower announcement returns. An increase of one standard deviation in advisor diversification is associated with an announcement return lower by 92 basis points for a bidder acquiring a listed target. The lower bidder returns are attributable to the lower synergies of the deals being completed. Our evidence suggests that internationally diversified advisors offer lower-quality advice to their clients, since their reputational concerns are weakened by having access to multiple geographies from which they can derive fee-based income. We present further evidence that financial incentives in the form of the advisor's involvement in deal financing and market incentives in the form of the potential to gain market share in the bidder country may mitigate some of the negative effects of the international diversification of the advisors. Data, as supplemental material, are available at . This paper was accepted by Wei Jiang, finance. [ABSTRACT FROM AUTHOR]