Upcoming Talk:

Financial Management Association Conference, October 22-25, 2025, Vancouver, Canada

Past Talks:

Research Symposium on Finance and Economics, June 11-13, Virtual, India

Eastern Finance Association Conference, April 2-5, 2025, Philadelphia, PA, USA

Southwestern Finance Association Conference, February 12-14, 2025, San Antonio, TX, USA

WORKING PAPERS

1. Do “MEASURES” of Bank Diversification Measure Up? (with Priyank Gandhi and Darius Palia)

• We analyze the effectiveness of several widely-used measures of bank business segment diversification in capturing the ‘diversification effect’, i.e., the ability of a measure to explain variations in idiosyncratic risk over time and across banks. Given that different segment incomes are imperfectly correlated, standard portfolio theory would suggest that bank business segment diversification should be negatively correlated with idiosyncratic risk. We find that several commonly used measures of bank business segment diversification are either poorly or positively correlated with idiosyncratic risk, suggesting that they are inaccurate or misleading indicators of bank business segment diversification. We instead propose the ‘Entropy’ measure that accounts for both the number of businesses segments that a bank operates in, as well as the proportion of banks’ incomes from the business segments. Entropy is significantly better at capturing the diversification effect and measuring bank diversification. Time-series variation in Entropy coincides with the passage of major banking legislations (such as the Gramm-Leach-Bliley Act in 1999 or the Dodd-Frank Act in 2010), providing an important validation for our measure. Using the Entropy measure, we revisit the question of how bank diversification impacts bank performance and risk and find that diversified banks exhibit better financial performance (ROA and ROE) and lower idiosyncratic and systemic risk (Z-score, tail risk, and MES), which is in stark contrast to findings in earlier papers that document an inconsistent relation between business segment diversification and bank performance.

• Presented/Scheduled: 2025 Financial Management Association Conference, 2025 Eastern Finance Association Conference, 2024 Sydney Banking and Financial Stability Conference, 2024 Pacific Basin Finance, Economics, Accounting and Management Conference, 2023 American Finance Association Committee on Racial Diversity, Sacred Heart University, Rutgers Business School, Auckland University of Technology, University of Sydney, University of Melbourne, University of New South Wales, Victoria University

• Awards/Grants: 

Graduate Student Travel Award, Rutgers University

2. Bank Diversification and Tail Risk (with Priyank Gandhi and Darius Palia)

• We examine the relationship between bank business line diversification and tail risk by assessing diversification across 16 business lines using a unique entropy-based measure. The results reveal that a one standard deviation increase in diversification is associated with a 2.5% reduction in tail risk in the subsequent quarter. This effect lasts up to four quarters ahead and is present in both good and bad times. Furthermore, diversified banks exhibit higher future stock returns in the next three quarters, higher profitability, lower default risk, higher change in loan supply, and lending resilience during the Great Recession. Lastly, diversification of core business lines (related diversification) is associated with lower tail risk and higher returns while diversification of noncore business lines (unrelated diversification) is not. This paper emphasizes the crucial role of diversification across business lines in mitigating tail risk and enhancing overall bank performance particularly during periods of financial instability and documents that it is related diversification that benefits banks.

• Presented/Scheduled: 2025 Research Symposium on Finance and Economics, 2025 Southwestern Finance Association Conference, 2025 Contemporary Issues in Financial Markets and Banking, 2024 Northeast Business and Economics Association Conference, Inter-Finance PhD Seminar, Hofstra University, Xavier University, The College of New Jersey, Rutgers Business School, Sacred Heart University, University of the District of Columbia

• Awards/Grants: 

Shortlisted for Best Papers, 2025 Contemporary Issues in Financial Markets and Banking 

Graduate Student Travel Award, Rutgers University

PhD Student Travel Grant, 2025 Southwestern Finance Association Conference

PhD Student Scholarship Award, 2024 Northeast Business and Economics Association Conference

WORK IN PROGRESS

3. Measuring the Cost of Capital for Banks (with Priyank Gandhi and Darius Palia)

• The existing banking literature lacks consensus on the optimal metric for assessing banks’ cost of capital, despite its frequent use of the Capital Asset Pricing Model (CAPM), which fails to explain significant variations in expected returns. Our study addresses this gap by systematically comparing various metrics and proposing a more effective one, enabling us to revisit the low-risk anomaly in bank stock returns where banks with lower leverage exhibit higher returns. Furthermore, we reassess the impact of the Dodd-Frank Act’s Volcker Rule on banks’ cost of capital.