Effect of trading on the profitability and solvency of colombian banks

Abstract

The banking models adopted by colombian banking, based on concepts applied in economies of developed countries, have enabled credit institutions to offer their clients new and more sophisticated services due to the multi-banking scheme. However, some authors have suggested that it is possible that the increasing participation of banks in trading operations, due to their income diversification strategy, may be detrimental to financial intermediation activities and is exposing them to risks in both profitability and solvency. Through the panel data methodology, this research seeks to study the effect of income diversification on colombian commercial banks’ profitability and financial solvency, between 2005 and 2014. The results show that the diversification of income through trading has no effect on the solvency and profitability of banks.

Authors

  • Ramiro Hernán Carillo castro
  • Alina Gómez Mejía Profesora

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Author Biographies


Relationship Manager, Banco de Occidente, Cali, Colombia. Business Administrator, Politécnico Grancolombiano, Colombia, Master in Finance, Pontificia Universidad Javeriana Cali, Colombia. Member of the Thought and Praxis Research Group, Category A Colciencias, Pontificia Universidad Javeriana Cali. ORCID iD: https://orcid.org/0000-0002-1340-9572 


, Profesora

Associate Professor, Director of the Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Pontificia Universidad Javeriana Cali, Colombia. Business Administrator, Pontificia Universidad Javeriana Cali, Colombia, PhD in Management Sciences, University of Rouen, France. Member of the Thought and Praxis Research Group, Category A Colciencias, Pontificia Universidad Javeriana Cali.
ORCID iD: https://orcid.org/0000-0001-7259-9911

Published
2019-03-27
| 269 |
How to Cite
Carillo castro, R., & Gómez Mejía, A. (2019). Effect of trading on the profitability and solvency of colombian banks. Cuadernos De Administración, 35(63), 55-69. https://doi.org/10.25100/cdea.v35i63.6937
Section
Research