Diversification in Korean Banking Business: Is Non-interest Income a Financial Saviour?. (December 2018)

• Record Type: Journal Article
• Authors: Baek, Seungho; Lee, Kwan Yong; Lee, Jeong Wan; Mohanty, Sunil
• Is Part Of: Journal of emerging market finance. Volume 17:Number 3(2018:Sep./Dec.)Supplement
• Page Start: S299
• Page End: S326
• Publication Date: 2018-12
• Subjects: Banking -- non-interest income -- diversification -- risk; Banks and banking -- Developing countries -- Periodicals; Financial institutions -- Developing countries -- Periodicals; Securities -- Developing countries -- Periodicals; 332.09172405
• DOI: 10.1177/0972652718798079
• Languages: English
• ISSNs: 0972-6527

Abstract

This article examines whether the diversification of operating income in Korean banks has persistently enhanced the performance of Korean banks. The results show that, despite Korean banks' efforts to diversify their operating income, these banks do not gain any benefit from the diversification. Thus, bank managers in Korea focus on interest income revenue. The results also show that the increase in non-interest income revenue keeps pace with the growth in expenses, which offsets the diversification effect on the performance of Korean banks. As a result, Korean banks discourage banking diversification and focus on non-interest income revenues. JEL Classification: G21