Productive, geographical and debtor diversification and its effect on the quality of the credit portfolio in Argentina

Working papers | 2008 | N 36

Abstract

This work analyzes the relationship between the quality of the commercial credit portfolio and diversification in financial entities in Argentina for the period 1998-2006. For this, a database of the financial sector (banking and non-banking) is used that allows considering three possible dimensions of diversification, by productive sector, by province and by client. In addition to characterizing the diversification decisions of financial entities during the period analyzed, which includes the severe economic and financial crisis at the end of 2001, an analysis of the determinants of portfolio quality is carried out, including the effect of diversification on the three dimensions mentioned. The results indicate that, controlling for the relevant variables, specialization improves the quality of the credit portfolio.