社区银行受益于多元化外文翻译.doc

社区银行受益于多元化外文翻译 毕业论文外文翻译出 处: Journal of Financial Services Research 作 者:KEVIN J.STIROH 原 文:Do community banks benefit from diversificaionAbstract This paper examines the link between diversification and risk-adjusted performance for small community banks. The results show diversification benefits within broad activity classes,but not between them.Specific business lines are linked with very different ex post outcomes,however,so the mix of activities is also important.In particular,an increased focus on noninterest income-generating activities is associated with declines in risk-adjusted performance,as are commercial and industrial lending and trading.This is a potential dark side of the search to diversify as managers may enter businesses where they have little experience or comparative advantage. Afinal set of results shows significant differences in the determinants of risk-adjusted performance for community banks relative to larger banks,which suggests that a competitive opportunity remains for community banks Introduction Despite their small size,community banks are a very diverse set of institutions with wide variation in both business strategies and ex post outcomes.This heterogeneity is apparent in the large differences in revenue sources,loan portfolio mixes,and profitability.In 2000, for example,some community banks earned all their operating revenue from interest-generating activities,while others focussed on other sources like fee income,fiduciary activities,or trading.Similar variation is seen within the loan portfolio as some community banks concentrate entirely in real estate lending,while others perform only commercial or consumer lending.Finally,some community banks consistently post returns on equity near 20%,while others saw persistent lossesThe differences in strategic focus allow analysis of one particular factor that might contribute to the variation in outcomes:diversification benefits from reducedconcentration in a single business line.While one might expect diversification to directly reduce risk,recent research for United States banks has been mixed.Most of these studies,however,have focussed on the large,complex banking institutions that dominate United States banking and relatively little is known about potential diversification benefits for community banks.This is an important issue because these banks still play a critical role in the United Statesfinancial system,especially for small businesses and consumers. Small,informationally opaque borrowers are often evaluated withsoft information''and rely on relationships with community bankers;if small bank lending is impaired or the relationship severed,it may be particularly difficult for these small borrowers to obtain alternativefinancing.Moreover,most community banks are typically privately owned,so owner/managers have incentives to reduce risk and maintain equity,human capital,and franchise valuesThis paper examines the link between risk-adjusted bank performance, diversification, and business line exposure for community banks from 1984 to 2000.By focussing on these small banks,one can obtain a better understanding of the trade-offs they face,the potential opportunities to improve performance,and their competitive position vis-aá-vis larger banks.If the operations and strategies of these banks offer a fundamentally different mix of risk and return,for example,then this leaves a potential niche for small banks to differentiate themselves from their larger competitors.This is,to my knowledge,thefirst study of revenue diversification for community banksI examine several distinct types of diversification.First,community banks can broadly diversify by shifting between interest-generating activities and activities that generate fees,fiduciary operations,trading revenue,and other noninterest income.While some of these activities are linked,e.g.,lending and loan commitment fees,noninterest income has been growing much more rapidly than net interest income and partially reects changes in bank's strategic focus like opening new business lines and offering new products.If returns to these broad activities are negatively or only weakly correlated,one would expect an improvement in terms of risk and return.Second,banks can diversify within each of these broad sets of activities,for example,a bank that makes primarily real estate loans could diversify by entering the consumer loan market or a bank that is concentrated in fiduciary activities could begin trading.Both types of expansion could,in principle, improve the risk/return performance of a community bank. To focus on risk,I move beyond familiar accounting measure of bank profits like return on assetsROAor return on equityROEand examine several measures of risk-adjusted performance.In particular,I compare indicators of diversification to risk-adjusted rates of returnaverage profit ratio divided by the standard deviation of the ratioand the Z-score number of standard deviations that profits must fall to push a bank into insolvency.For these community banks that do not have publicly traded securities,these are the best measure of risk-adjusted returns and the Z-score provides direct information about insolvency risk that is relevant to both bank managers and regulators. The empirical results show little evidence of diversification benefits between broad activity classes,but diversification benefits within lending and noninterest activities. Community banks with more concentrated loan portfolios,for example,have lower risk-adjusted profits and Z-scores.This suggests that community banks do better when they stay focussed on major activities,but gain by diversifying within that area of expertise. The data also point to a robust size effect where increased asset size is associated with higher returns and lower return volatility,which could reect the benefits of scale or geographic diversification. There are also systematic differences across business lines,so managers must remain cognizant of the risks associated with specific activities.Most notably,noninterest income is negatively associated with risk-adjusted performance,as are commercial and industrial lending,other lending,fee-based activities,and trading.This is a potential dark side of the search for diversification benefits:banks may move beyond areas of comparative advantage and enter businesses where they lack the expertise,technology,or scale needed to compete successfully.In addition,DeYoung and Roland2001argue that fundamental differences between interest and noninterest activities,for example,the nature of customer relationships,input mixes,and capital requirements,make fee-based activities inherently more volatile.Thus,community banks must carefully weigh the trade-offs between a more diversified set of activities and expansion into volatile business lines that have been historically associated with worse outcomes. Afinal set of results shows significant differences in the determinants of risk-adjusted performance between community and other banks.This could reect fundamentally different technology,operations,and business practices or different lending markets and customers,and may provide a comparative advantage for community banks in certain market segments.If so,this creates an opportunity for community banks to serve viable banking markets that are less attractive to their larger competitors and is one reason for optimism about the future of community banks The importance of community banks The question of diversification benefits for community banks is at the intersection of two empirical literaturesDthe role of small banks in small business lending and the potential for diversification benefits in banking.This section briey reviews these two research lines to provide the context for the questions addressed in this paper. Debate about the importance of small,community banks centers on the question of whether they provide banking services like small business lending that are not provided by their larger competitors.Berger et al.1998,DeYoung et al.1999,and Berger and Udell forthcomingall discuss why small banks may focus on small business lending.Potential explanations include:informational cost advantages for small banks in lending to small, informationally opaquefirms;ability to process soft information;the need for long-run financial relationships;organizational diseconomies of scale that raise the cost of small business lending at larger banks;reduced agency costs for less complicated organizations; local market expertise;consumer preferences for local banks;etc.If this is the case and some smallfirms are bank-dependent,then this creates an important role of small banks in ourfinancial system.The empirical evidence,however,is mixed. Nakamura1993,Keeton1995,Berger and Udell1996,Peek and Rosengren1996, Strahan and Weston1998,DeYoung et al.1999report that the share of assets in small business lending declines with bank size.Berger et al.1998look at the impact of mergers on small business lending and report that consolidation itself reduces small business lending,while Pilloff and Rhoades2000conclude that large diversified banks do not have net competitive advantages over their small rivals.Finally,Berger et al.2003find fundamentally differentlending technologies''for small and large banks.All of this suggests a special role for small banks. Strahan and Weston1998,however,also report that the level of small business loans rises monotonically with bank size.Berger et al.1998alsofind that much of the decline in post-merger small business lending is offset by increases by other local banks,and Berger et al.2001show that theseexternal effects''vary across bank size.Berger et al. 2001show that the probability that a smallfirm borrows from a small bank is proportional to the market of banks of that size,while Peek and Rosengren1998are mixed on the impact of mergers on small business lending,depending on the acquirer's loan portfolio.Finally,Jayaratne and Wolken1999report no evidence of a small bank cost advantage that would suggest important constraints on small businesses from the absence of small banks.This evidence suggests that the dynamics of small business lending are quite complex and it is not enough to simply look at small bank loan shares or the relative importance of small banks in a given market. The ongoing deregulation trend has contributed to a steady expansion of bank power and activities.While one might expect this to provide a means to diversify bank operations, increase revenue,and reduce risk,this need not be the case.Morgan and Samolyk2003 show that an expansion of activities can lead to either increases or decreases in risk, depending on preferences.Empirically,Saunders and Walter1994review 18 studies that examine whether non-bank activities reduce bank holding company risk,and conclude that nine answer yes,six answer no,and three provide mixed results. This literature on bank diversification has approached the questions from several directions.Several papers perform counterfactual exercises of bank combinations with non-banksBoyd and Graham,1988;Boyd et al.,1993;Rose,1989;Saunders and Walter, 1994;Lown et al.,2000.These papers typicallyfind some potential diversification benefits,particularly between commercial banks and life insurance companies.More recently,Emmons et al.2003examine geographic risk of community banks and conclude that the major gainslower default probabilitiesare possible through increases in bank size,rather than increased spread of the bank.This suggests that community banks can achieve diversification gains through growth,without geographic expansion. A second set of papers examines the accounting results of banks involved in a wide- range of activitiesRosen et al.,1989;Templeton and Severiens,1992;Kwast,1989; DeYoung and Roland,2001;Acharya et al.,2002;Stiroh,forthcoming.Here,the results are mostly negative with only Templeton and Severiens1992finding strong evidence of reduced risk as banks expand their activities.Both DeYoung and Roland2001and Stiroh forthcomingfind that increased reliance on noninterest activities like fee income and trading increases the volatility of bank earnings.DeYoung and Roland2001point to three factors that make noninterest income more volatile than interest income:low switching costs for noninterest activities,high-operating leverage that amplifies revenue volatility into higher profit volatility,and higherfinancial leverage due to differences in regulatory capital requirements. A third approach uses market data to evaluate potential diversification benefits Santomero and Chung,1992;Saunders and Walter,1994;Demsetz and Strahan,1997; DeLong,2001.The evidence here is also mixed with Santomero and Chung1992and Saunders and Walter1994finding risk reduction in the form of less volatile market returns,while DeLong2001finds little value creation from diversifying mergers. Demsetz and Strahan1997reach a more subtle conclusion:large bank holding companies are more diversified than small ones,but not necessarily safer because they pursue riskier lending lines and operate with increased leverage.Similarly,Cebenoyan and Strahanforthcomingfind that active credit risk management in the form of buying and selling loans allows banks to hold less capital and make more risky loans. This paper asks whether diversification via new operations and business lines helps community banks.While many studies have examined the performance of small banks Shaffer,1989;Nakamura,1993;Zimmerman,1996a,b;Basset and Brady,2001;Meyer and Yeager,2001,noneto my knowledgehave directly examined the potential for revenue diversification benefits for community banks.If one believes that these banks play an important role in the economy,then this is a relevant question because it helps to identify the strategies that make a community bank successful. Data and summary statistics This analysis requires data on diversification and risk-adjusted performance for individual small,community banks.To construct these measures,I use data from the Consolidated Report of Condition and IncomeCall Reports''for 1984±2000.All data are deflated with the GDP deator.The set of smallcommunity''banks is defined as all banks with assets less than$300 millionin 1996 dollarsand with no affiliation to another bank through a multi-bank holding company. The set ofother''banks is defined as all remaining banks;these are either large banks or small banks that belong to multi-bank Table 1.Summary statistics for community and other banks,1984±2000 Community banks have assets less than$300 millionin 1996 dollarsand are not part of a multi-bank organization in that year.Other banks include all other commercial banks.All dollarfigures are sums for the two groups and reported in 1996 dollars.Income shares are