Market reaction to banks revenue diversification strategy: evidence from India

摘要

This paper examines whether revenue diversification by banks is beneficial using data from India for the period 1995-2018. We use non-interest income to total income ratio as a measure of revenue diversification, and use market measures of returns and risk to evaluate the benefits. The results indicate that a higher share of non-interest income in total income leads to a higher market return and lowers the market risk. These results broadly remain the same even when we divide the sample into public (government owned) and private banks.