Investigating the Impact of Diversification Strategy in Assets and Loans on Bank Return

Subject Areas : Financial engineering

Mousa Bozorg Asl ¹ , Alireza Akbari Masule ² , Mohammad Javad Mohaghegh Nia ³ , Mohammad Taghi Taqhavi Fard ⁴

1 - Associated Professor, Financial Mangment Department, Allameh Tabataba'i University, Tehran
2 - financial mangment department, Allameh Tabataba'i University, Tehran
3 - Assistant professor, Islamic banking department, Allameh Tabataba'i University, Tehran
4 - Associated Professor, Industrial Mangment Department, Allameh Tabataba'i University, Tehran

Received: 2016-11-01 Accepted : 2016-12-27 Published : 2017-04-21

Keywords: Bank Return- Diversification- Herfindahl Hirschman Index,

Abstract :

Diversification and return's relationship is a question that every bank faces with it. It is a routin issue that the bank should answer to it. This study also seeks to evaluate the relationship between diversification and return. The sample of study is 10 banks included Saderat, Mellat, Tejarat, Parsian, Eghtesad Novin, Pasargad, Sina, Hekmat, Day, Sarmaye, Post bank, and Karafrin. The period of study was from 2011 to 2015. Herfindal Herishman index (HHI) was used as the proxy of diversification and two kinds of return included return of assets (ROA) and return on equity (ROE). The multiple regression is used and estimated by estimated generalized least squares (EGLS). The results showed that there was a significant and adverse relationship between diversification of assets and ROA. Also, there wasn't a significant relationship between diversification of loans and ROA. Furthermore, there wasn't a significant relationship between diversification of loans and assets with ROE