Table 1: Summary statistics of loan and asset diversification measures

Variable

Obs

Mean

Std. Dev.

Min

Max

Corporate Loans / Total Loans

215

0.5536608

0.2009494

0.0583662

0.9309049

Non Corporate Loans / Total Loans

215

0.4463392

0.2009494

0.0690951

0.9416338

Loan focus

215

0.5860184

0.0894969

0.5000005

0.8900807

Total Loans

215

0.7815795

0.1257745

0.2356273

0.89469854

Securities and Other Financial Assets

215

0.3552445

0.1383932

0.1053104

0.9453914

Asset focus

215

0.5800355

0.0737064

0.500022

0.8967469

Loan Diversification

215

0.2131564

0.1879942

-0.4537728

1.022717

Asset Diversification

215

-0.076729

0.2588491

-1.876873

2.018675

Profit Efficiency

215

0.8037204

0.1136669

0.5599919

0.9624618

Focus Index

Economies of Diversification

Table 2: Stochastic Frontier Analysis of Bank Profit Efficiency

Table 3.A: Regression of Focus Index on Profit Efficiency

Profit Efficiency

Coef.

Std. Err.

P>z

Loan Focus

-0.0139678

0.0518244

-0.27

0.788

Lerner Index

0.3556152

0.05127

6.94

Equity/Total Asset

-0.0196663

0.1577256

-0.12

0.901

ln Total Asset

0.0108188

0.0057334

1.89

0.059

lnZ-score*

-0.0063108

0.0036234

-1.74

0.082

LLP/Asset

0.5561583

0.4618486

1.2

0.229

GDP Growth

-0.0003041

0.0839728

0.997

Inflation

0.0355304

0.1760172

0.2

0.84

Bank Concentration

-0.0586357

0.062796

-0.93

0.35

0.433485

0.1070801

4.05

_cons
* significant at the 90% CI

Profit Efficiency

Coef.

Std. Err.

P>z

Asset Focus

-0.1449333

0.0701719

-2.07

0.039

Lerner Index

0.3584275

0.0504139

7.11

0%

Equity/Total Asset

0.0152658

0.1540736

0.1

0.921

ln Total Asset

0.0105537

0.0056641

1.86

0.062

lnZ-score*

-0.0063066

0.0034953

-1.8

0.071

LLP/Asset

0.4813414

0.4362338

1.1

0.27

GDP Growth

-0.0035006

0.0804644

-0.04

0.965

Inflation

0.0108293

0.1691373

0.06

0.949

Bank Concentration

-0.0762551

0.0620164

-1.23

0.219

_cons

0.5195125

0.1092252

4.76

* significant at the 90% CI

Table 3.B: Regression of Focus Index on ROA

R-sq: within = 0.2832

F(10,158)

between = 0.2434

corr(u_i, Xb) = -0.4057

6.24

overall = 0.2192
ROA

Coef.

Std. Err.

P>T

Loan Focus

-0.272453

0.1205872

-2.26

0.025

Lerner Index

0.2981979

0.1147207

0.1147207

2.6

Equity/Total Asset

-2.279565

0.4113583

0.4113583

-5.54

ln Total Asset

-0.0686128

0.0500396

0.0500396

-1.37

lnZ-score*

0.0337762

0.0073318

0.0073318

4.61

LLP/Asset

4.963084

1.121556

1.121556

4.43

GDP Growth

0.2808991

0.2242399

0.2242399

1.25

Inflation

0.077445

0.4293713

0.4293713

0.18

Bank Concentration

0.0168594

0.1689848

0.1689848

0.1

yeardummy

0.0145335

0.0080816

0.0080816

1.8

_cons

1.256951

0.8230706

0.8230706

1.53

sigma_u

0.09200316

sigma_e

0.0771025

rho

0.58743561

F test that all u_i=0:

F(42, 158) =

3.86

Prob > F = 0.0000

R-sq: within = 0.2611

between = 0.2235
overall = 0.1980
ROA
fassetfocus
newlerner
equityasset
lnTA
lnz
llpasset
gdpgrowth
inflation
bankconcentration
yeardummy
_cons
sigma_u
sigma_e
rho
F test that all u_i=0:

F(10,158)
corr(u_i, Xb) = -0.3965

Coef.
0.0804754
0.2875325
-2.274705
-0.0703216
0.0345244
4.470543
0.2552916
0.1522658
0.036889
0.0147
1.081418
0.09236074
0.07828421
0.58193264
F(42, 158) = 3.83

Std. Err.
0.1724291
0.1183114
0.4177457
0.0508014
0.0074575
1.120298
0.2273931
0.4346273
0.1717544
0.0082214
0.8379979

Prob > F = 0.0000

5.58

t
0.47
2.43
-5.45
-1.38
4.63
3.99
1.12
0.35
0.21
1.79
1.29

P>t
0.641
0.016
0
0.168
0
0
0.263
0.727
0.83
0.076
0.199

Table 4.A: Regresssion of Loan Focus Index on Economies of Diversification

Baseline
Fixed-effects (within) regression
Group variable: bid

Number of obs
Number of groups

211
43

R-sq: within = 0.4248

between = 0.0506
overall = 0.1215

Obs per group: min

avg
max
F(10,158)
Prob > F
Std. Err.
0.1607204
0.1525914
0.5471446
0.0665576
0.0097523
1.492334
0.298304
0.5713025
0.224776
0.0107496
1.094796

4
4.9
5
11.67
0

corr(u_i, Xb) = -0.6211

QSL
Loan Focus
Lerner Index
Equity/Total Asset
ln Total Asset
lnZ-score
LLP/Asset
GDP Growth
Inflation
Bank Concentration
yeardummy
_cons

Coef.
-0.5677396
1.208626
-3.545851
-0.1324316
0.0089943
1.921221
1.100894
-0.8537829
-0.0828286
0.0074559
2.252852

sigma_u
sigma_e
rho

0.19647933
0.10255418
0.78589084

t
-3.53
7.92
-6.48
-1.99
0.92
1.29
3.69
-1.49
-0.37
0.69
2.06

P>t
0.001
0
0
0.048
0.358
0.2
0
0.137
0.713
0.489
0.041

Quadratic in Focus Index

Fixed-effects (within)
regression
Group variable: bid

Number of obs
=
Number of groups =

R-sq: within = 0.4343

between = 0.0487
overall = 0.1207
corr(u_i, Xb) = -0.6256
QSL
Loan Focus _sq
Loan Focus _sq
Lerner Index
Equity/Total Asset
ln Total Asset
lnZ-score*
LLP/Asset
GDP Growth
Inflation
Bank Concentration
yeardummy
_cons
sigma_u | .19792062
sigma_e | .10202949
rho | .79004692

Coef.
-3.139039
1.986243
1.216558
-3.568431
-0.1299285
0.0080917
1.634293
1.051523
-0.7963645
-0.0940564
0.0063418
3.033759

211
43
Obs per group: min =
4
avg =
4.9
max =
5
F(11,157)
= 10.96
Prob > F
= 0.0000
Std. Err.
1.593805
1.224949
0.1518895
0.5445234
0.066235
0.0097183
1.495207
0.2983355
0.5694816
0.2237332
0.0107166
1.190917

t
-1.97
1.62
8.01
-6.55
-1.96
0.83
1.09
3.52
-1.4
-0.42
0.59
2.55

P>t
0.0510
0.1070
0.0000
0.0000
0.0520
0.4060
0.2760
0.0010
0.1640
0.6750
0.5550
0.0120

Hausman Test
---- Coefficients ---(b)
(B)
QSLsqfe
qslsqre
Loan Focus
Lerner Index
Equity/Total Asset
ln Total Asset
lnZ-score*
LLP/Asset
GDP Growth
Inflation
Bank Concentration
yeardummy
const

-3.139039
1.986243
1.216558
-3.568431
-0.1299285
0.0080917
1.634293
1.051523
-0.7963645
-0.0940564
0.0063418

-1.637308
0.8840246
1.010896
-2.657513
-0.0076399
0.0087121
1.298327
0.8006655
-1.432582
0.1573184
-0.0060129

(b-B)
Difference
-1.501731
1.102218
0.2056623
-0.9109172
-0.1222886
-0.0006204
0.3359657
0.2508577
0.6362174
-0.2513749
0.0123547

sqrt(diag(V_b-V_B))
S.E.
0.9141419
0.6943931
0.0998046
0.4082892
0.0652052
0.00412
1.049768
0.0461861
0.2008087
0.1796358
0.0085553

b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg
Test: Ho:

difference in coefficients not systematic

chi2(11) = (b-B)'[(V_b-V_B)^(-1)](b-B)
81.75
Prob>chi2 =
0.0000
(V_b-V_B is not positive definite)

Table 4.B: Regresssion of Asset Focus Index on Economies of Diversification

Baseline
Fixed-effects (within) regression
Group variable: bid

Number of obs
Number of groups

211
43

R-sq: within = 0.2261

between = 0.1850
overall = 0.1661

Obs per group: min

avg
max

4
4.9
5

corr(u_i, Xb) = -0.2071

F(10,158)
Prob > F

QSAt
Asset Focus
Lerner Index
Equity/Total Asset
ln Total Asset
lnZ-score*
LLP/Asset
GDP Growth
Inflation
Bank Concentration
yeardummy
_cons
sigma_u
sigma_e
rho
F test that all u_i=0:

Coef.
0.3678775
0.5953213
-4.180531
-0.1136064
0.0361701
3.796946
0.1692452
-0.7582056
-0.1878844
-0.0018856
1.596023

F(42, 158) =

Std. Err.
0.3327797
0.2283354
0.8062286
0.0980441
0.0143925
2.162119
0.4388575
0.8388093
0.3314774
0.0158669
1.617295

0.20335738
0.15108466
0.64433949 (fraction
5.68
Prob > F = 0.0000

4.62
0
1.11
2.61
-5.19
-1.16
2.51
1.76
0.39
-0.9
-0.57
-0.12
0.99

of variance due

0.271
0.01
0
0.248
0.013
0.081
0.7
0.367
0.572
0.906
0.325

Quadratic in Focus Index

Fixed-effects (within) regression
Group variable: bid

Number of obs
Number of groups

211
43

R-sq: within = 0.2589

between = 0.3436
overall = 0.2881

Obs per group: min

avg
max

4
4.9
5

corr(u_i, Xb) = -0.1370

QSAt
fassetfocus
assetfocussq
lernerindex
equityasset
lnTA
lnz
llpasset
gdpgrowth
inflation
bankconcentration
yeardummy
_cons
sigma_u
sigma_e
rho

F(11,157)
Prob > F
Coef.
-7.003452
5.604322
0.5585826
-4.069953
-0.113129
0.0350166
4.484341
0.1058783
-0.5285828
-0.2100753
0.000762
3.949923
0.18035795
0.14831531
0.596573

4.99
0
Std. Err.
2.814033
2.125006
0.2245825
0.7925604
0.0962471
0.0141355
2.138432
0.4314829
0.8280243
0.3255103
0.0156084
1.821332

P>t
-2.49
2.64
2.49
-5.14
-1.18
2.48
2.1
0.25
-0.64
-0.65
0.05
2.17

0.014
0.009
0.014
0
0.242
0.014
0.038
0.806
0.524
0.52
0.961
0.032

Hausman Test
---- Coefficients ---(b)
(B)
(b-B) sqrt(diag(V_b-V_B))
qsafe
qsare
Difference
S.E.
Asset Focus
Lerner Index
Equity/Total Asset
ln Total Asset
lnZ-score*
LLP/Asset
GDP Growth
Inflation
Bank Concentration
yeardummy

.3678775 -.4640813
.5953213 .7334818
-4.180531 -3.659884
-.1136064 -.1161532
.0361701 .0272648
3.796946 2.441619
.1692452 .4014836
-.7582056 .4463956
-.1878844 -.1928773
-.0018856 -.0066931

.8319588
-.1381605
-.5206469
.0025468
.0089053
1.355327
-.2322384
-1.204601
.0049929
.0048075

.2164657
.1335364
.5434747
.0959696
.0041667
1.339738
.
.1769024
.2466603
.0123184

b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg
Test: Ho: difference in coefficients not systematic
chi2(10) = (b-B)'[(V_b-V_B)^(-1)](b-B)
11.59
Prob>chi2 =
0.3136
(V_b-V_B is not positive definite)