Business Diversification and Banks’ Performance: The Moderating Role of Credit and Liquidity Risk (Empirical Study)

Alsayed, Dr. Marwa Saber Hamoda; Amirhom, Dr. Gihan Adel Nagi; A.Y. Azzam, Dr. Mohsen Ebied

doi:10.21608/masf.2022.278049

Business Diversification and Banks’ Performance: The Moderating Role of Credit and Liquidity Risk (Empirical Study)

نوع المستند : المقالة الأصلية

المؤلفون

¹ , Accounting Department, Faculty of Commerce Menoufia University

² Accounting and Auditing Department, Faculty of Commerce,Port Said University

³ Accounting Department, Faculty of Commerce, Menoufia University

10.21608/masf.2022.278049

المستخلص

The major objective of this study is to explore the moderating role of credit risk and liquidity risk on business diversification and banks’ performance relationship, i.e., investigating the interaction relationship between banks’ risks and business diversification on banks’ performance. In light of this, the study also aims to examine the impact of credit risk and liquidity risk on banks’ performance, especially in emerging countries like Egypt. Moreover, it seeks to test the effect of business diversification, through revenue diversification, asset diversification, and funding diversification, on banks’ performance. This study depends on a sample consisting of 10 banks over the period from 2012 to 2021. The findings indicate that credit risk has a negative impact on banks’ performance, whereas liquidity risk has a positive impact on banks’ performance. Also, revenue diversification and asset diversification have a positive effect on credit risk, and only asset diversification has a positive effect on liquidity risk. Furthermore, all activities of diversification have an insignificant impact on banks’ performance. The most important result is that credit risk and liquidity risk moderate business diversification and banks’ performance relationship as credit risk changes the effect from an insignificant negative impact to a significant positive effect. Also, credit risk adjusts the impact of asset diversification from an insignificant positive impact on banks’ performance to a significant positive impact. Furthermore, liquidity risk is able to convert the impact of revenue diversification on banks’ performance from an insignificant negative impact to a significant negative impact.

الكلمات الرئيسية