Income Diversification and Its Impact on the Financial Performance of Commercial Banks in Albania (Systematic Literature Review)

Ervi Kosta1, Albana Jupe2

The diversification in the banking sector has always been a hot topic for discussion in literature. The effects of bank diversification involving the performance, risks, efficiency and value of banks, have been thoroughly scrutinized and studied, especially in the banking market of America and later on in Europe. The aim of this study is to give a re-evaluation of the literature regarding the influence of income diversification in the financial performance of the banking market.

The methodical re-evaluation of the literature is based on the study conducted by Appiah et al, (2015). A study of 25 scientific articles has been conducted in total by applying the specified protocols of a literature re-evaluation. The obtained results by the selected articles have been displayed and summarized in the tables and charts of the paper in order to be more comprehensible by the reader.

The studies pertaining the influence of income diversification in the performances of banks in developing countries have driven a wedge in literature. Referring to the conducted studies, the scholars have not come to a concrete conclusion regarding the influence of income diversification in the bank’s performance. The Herfindahl-Hirschman (HHI) index and the income ratio based on non-interest are good representatives of the most utilized measurements of income diversification. This methodical re-evaluation of literature is an important basis on which to conduct further studies with regard to income diversification. Thus, bank directors and scholars shall benefit therein from the results of this study.

Keywords: Income diversification, financial perfomance, commercial banks, methodical re-evaluation of literature

JEL Codes: G21, L25, C12

Related Articles