What the study found
Diversification in commercial banks has mixed and context-dependent effects. The study reports that it can improve profitability and valuations in some settings, but it can also increase earnings volatility and reduce risk-adjusted performance in others.
Why the authors say this matters
The authors say these findings help bank managers align strategies with economic conditions, and they say policymakers can use them to design regulations that adapt to macroeconomic fluctuations. The study also suggests that the role of monetary policy in bank diversification is important and is often overlooked.
What the researchers tested
The researchers conducted a PRISMA 2020-based systematic literature review using Scopus data from 2006 to 2025. They also carried out bibliometric analysis with VOSviewer 1.6.20 and RStudio 4.4.3 to identify key themes and citation patterns.
What worked and what didn't
The findings were heterogeneous and context-dependent. Diversification sometimes worked by improving profitability and valuations, but it did not consistently improve performance across all settings, and in some cases it was associated with greater earnings volatility and lower risk-adjusted performance.
What to keep in mind
The abstract does not report detailed study limitations beyond the fact that the findings vary by context. It also says that the impact of monetary policy is significant but mediated by broader macroeconomic factors, so the results are not presented as universal.
Key points
- Diversification in commercial banks showed mixed effects across settings.
- It sometimes improved profitability and valuations.
- It sometimes increased earnings volatility and reduced risk-adjusted performance.
- The impact of monetary policy was described as significant but shaped by broader macroeconomic factors.
- The study used a PRISMA 2020-based review of Scopus literature from 2006 to 2025 plus bibliometric analysis.
Disclosure
- Research title:
- Bank diversification has mixed effects on performance
- Authors:
- Ven Phuoc Luu, Duc Hong Thi Phan, Huy Quoc Bui
- Institutions:
- Vietnam National University Ho Chi Minh City, University of Economics Ho Chi Minh City, Ho Chi Minh University of Banking, City of Knowledge, RMIT University, Universiti Tunku Abdul Rahman
- Publication date:
- 2026-03-05
- OpenAlex record:
- View
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