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SMART Journal of Business Management Studies
Year : 2015, Volume : 11, Issue : 2
First page : ( 1) Last page : ( 11)
Print ISSN : 0973-1598. Online ISSN : 2321-2012.
Article DOI : 10.5958/2321-2012.2015.00001.9

Investigating the effects of sectoral diversification of loan and advances on risk and return of Indian Commercial Banks: Post -Financial Crisis of 2008

Shameem Jawed Mohammad1, Kumar Tiwari Santosh2, Subhash Dhaigude Amol3, Vinod Tapar Archit4

1Research Scholar (Finance & Accounting), Indian Institute of Management, Indore, India, Email: -f12mohammads@iimidr.ac.in

2Research Scholar (Strategic Management), Indian Institute of Management, Indore, Email: -f12santosht@iimidr.ac.in

3Research Scholar (OM&QT), Indian Institute of Management, Indore, Email: -f12amold@iimidr.ac.in

4Research Scholar (Marketing Management), Indian Institute of Management, Indore, Email: -f13architt@iimidr.ac.in

JEL Code: G21, G28, G32, C23, L25

Online published on 7 September, 2015.

Abstract

This paper seeks to investigate the effects of sectoral diversification of loan and advances on risk and return of Indian commercial banks in the aftermath of the financial crisis of 2008. Forty Indian commercial banks were taken up for the study during the period 2009–2013. Using the Hirschman-Herfindhl Index (HHI) as a measure of diversification, a panel data regression analysis was performed. It is found that the sectoral diversification of loan and advances helps in reducing the bank risk while its impact on bank return was found to be inverted U-shaped.

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Keywords

Sectoral Diversification Strategy; Bank Return; Bank Risk; Indian Banking; Concentration Measures; HHI Index; Panel Data Regression.

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