Philippine universal bank's degree of product and revenue diversification: Determinants and effects on financial performance

• Main Authors: Arnedo, Paula Therese F., Caringal, Karen Marie C., Dy, Danica P., Rubio, Maria Rheza Mae D.
• Format: text
• Language: English
• Published: Animo Repository 2011
• Subjects: Universal banks > Philippines; Banks and banking > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18480
• Institution: De La Salle University

As a conventional wisdom, diversification is a firm's strategy to gain higher profits and minimize exposure to risks. In this study, the degree of divestification of the universal banks operating locally will be analyzed in terms of their products and revenue, using the loan and deposit focus indices, and entropy measure of diversification, respectively. Using the random effects estimation technique, and as supported by the traditional banking portfolio theory, we take the universal banks' financial accounts from the Bangko Sentral ng Pilipinas, and simulate the determinants and effects of diversification on profitability. Through this, we hypothesize that the traditional banking and portfolio theory supports the positive and significant relationship between divestification and profitability in the Philippine universal banking industry.