TY  - JOUR
AB  - Purpose The purpose of this paper is to investigate the effect of revenue diversification, non-interest income and asset diversification on the performance and stability of the Gulf Cooperation Council (GCC) conventional and Islamic banking systems.Design/methodology/approach The authors implement a panel of 69 conventional and Islamic banks listed in six GCC markets over the period of 2003–2015, using the System Generalized Method of Moments methodology.Findings Non-interest income diversification has a negative impact on GCC banks’ performance, while asset-based diversification affects banks performance positively. However, Investors tend to penalize the value of the banks’ assets, which are highly diversified. Government intervention, lack of competition, legal protection and high control of Central banks on GCC banks’ have positive impact on performance. Contrary to the results on conventional banks, asset diversification adds value to Islamic banks. Overall, both banks’ revenue and non-interest diversification have negative impact on GCC banks’ stability, while asset diversification improves Islamic banks’ stability.Research limitations/implications The analysis is limited to a sample of banks, which are listed in the GCC stock exchanges. The lack of data on private and foreign banks operating in the region made the analysis and, consequently, the results specific to shareholding companies. Also, the authors’ measures of bank stability might not be appropriate to use for Islamic banks, given their banking models implemented.Practical implications Research results provide important implications for regulators, bank managers and policy makers, as to the expected ways to support economic diversification through bank diversification strategies.Originality/value Unlike related studies, the authors’ sample of homogeneous banks has a market structure that is different from the samples in the literature covering either developed countries or heterogeneous samples from both developed and developing countries. Furthermore, using an efficient econometric methodology, the authors deal with two types of banks: conventional banks and Islamic banks. The research determines which type of bank is more able to benefit from different types of diversification. Unlike previous research, this research explores the sensitivity of the results both to the regulatory environment of the GCC market and to general market conditions.
VL  - 15
IS  - 1
SN  - 1743-9132
DO  - 10.1108/IJMF-01-2018-0024
UR  - https://doi.org/10.1108/IJMF-01-2018-0024
AU  - AlKhouri Ritab
AU  - Arouri Houda
PY  - 2019
Y1  - 2019/01/01
TI  - The effect of diversification on risk and return in banking sector: Evidence from the Gulf Cooperation Council countries
T2  - International Journal of Managerial Finance
PB  - Emerald Publishing Limited
SP  - 100
EP  - 128
Y2  - 2024/04/23
ER  -