Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 1836-1849 |
| Number of pages | 14 |
| Journal | Journal of Banking & Finance |
| Volume | 32 |
| Issue number | 9 |
| DOIs | |
| Publication status | Published - Sep 2008 |
Fingerprint
Cite this
}
The diversification and financial performance of US credit unions. / Goddard, John; McKillop, Donal; Wilson, John O.S.
In: Journal of Banking & Finance, Vol. 32, No. 9, 09.2008, p. 1836-1849.Research output: Contribution to journal › Article
TY - JOUR
T1 - The diversification and financial performance of US credit unions
AU - Goddard, John
AU - McKillop, Donal
AU - Wilson, John O.S.
PY - 2008/9
Y1 - 2008/9
N2 - For US credit unions, revenue from non-interest sources has increased significantly in recent years. We investigate the impact of revenue diversification on financial performance for the period 1993–2004. The impact of a change in strategy that alters the share of non-interest income is decomposed into a direct exposure effect, reflecting the difference between interest and non-interest bearing activities, and an indirect exposure effect which reflects the effect of the institution’s own degree of diversification. On both risk-adjusted and unadjusted returns measures, a positive direct exposure effect is outweighed by a negative indirect exposure effect for all but the largest credit unions. This may imply that similar diversification strategies are not appropriate for large and small credit unions. Small credit unions should eschew diversification and continue to operate as simple savings and loan institutions, while large credit unions should be encouraged to exploit new product opportunities around their core expertise.
AB - For US credit unions, revenue from non-interest sources has increased significantly in recent years. We investigate the impact of revenue diversification on financial performance for the period 1993–2004. The impact of a change in strategy that alters the share of non-interest income is decomposed into a direct exposure effect, reflecting the difference between interest and non-interest bearing activities, and an indirect exposure effect which reflects the effect of the institution’s own degree of diversification. On both risk-adjusted and unadjusted returns measures, a positive direct exposure effect is outweighed by a negative indirect exposure effect for all but the largest credit unions. This may imply that similar diversification strategies are not appropriate for large and small credit unions. Small credit unions should eschew diversification and continue to operate as simple savings and loan institutions, while large credit unions should be encouraged to exploit new product opportunities around their core expertise.
UR - http://www.scopus.com/inward/record.url?scp=48949088642&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2007.12.015
DO - 10.1016/j.jbankfin.2007.12.015
M3 - Article
VL - 32
SP - 1836
EP - 1849
JO - Journal of Banking & Finance
JF - Journal of Banking & Finance
SN - 0378-4266
IS - 9
ER -