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The Effects of Loan Portfolio Concentration on Brazilian Banks' Return and Risk (Tabak B. M., Fazio D. M., Cajueiro D. O.)

Bank Profitability Risk-taking and Risk Management Structure of Assets&Liabilities

Abstract This paper tests whether diversification of the credit portfolio at the bank level is associated to better performance and lower risk. We employ a new high frequency (monthly) panel data constructed for the Brazilian banking system with information at the bank level for loans by economic sector. We find that loan portfolio concentration increases returns and also reduces default risk; there are significant size effects; foreign and public banks seem to be less affected by the degree of diversification. An important additional finding is that there is an increasing concentration trend after the breakout of the recent international financial crisis, especially after the failure of Lehman Brothers.
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Libref/ Tabak B. M., Fazio D. M., Cajueiro D. O. (2010) "The Effects of Loan Portfolio Concentration on Brazilian Banks' Return and Risk", Central Bank of Brazil Working Paper No. 215, pp. 1 - 47
© Программирование — Александр Красильников, 2008
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