چگونگی گوناگونی بانک ارزش بازار سهام: شواهد از ویتنام How does the stock market value bank diversification? Evidence from Vietnam

1. Introduction Important challenges for global banking system are cyclical and structural changes. Since the global financial crisis, banks continue to struggle in a more competitive environment due to the technological developments and the rise of shadow banking. Many commercial banks have been following the diversification strategy to enter into various non-traditional activities as a way to compensate for reduced incomes due to increased competition in core businesses. More importantly, bank governance mechanisms are also reported to be associated with bank diversification (Liang et al. 2016). Given this trend, the question of whether banks should diversify gains importance for different stakeholders (Sawada 2013). This paper sheds further light on the question how stock market value bank diversification. Particularly, we address the relationship between bank diversification and stock market valuation using the data of banks listed on the Ho Chi Minh City stock exchange for the period from 2006- 2014. Our paper is motivated from different fronts. Firstly, the question of whether banks should diversify is the subject for extensive debate in the current literature. However, the answer to this question remains open as previous papers provide conflicting results (Sawada 2013). More specially, papers using different data set provide inconclusive results. For instance, Baele et al. (2007) assert that diversification increases value and reduces risk in a sample of European banks. On the contrary, Laeven & Levine (2007) argue that diversification reduces value of financial conglomerates using a cross-country data set. Moreover, Stiroh & Rumble (2006) state that the extra risk outweighs the benefits obtain from diversification because the increase in exposure to highly volatile nontraditional bank businesses.