Investigating the Effect of Geographical Diversification on Banks Performance

The impact of geographical diversification on the performance of banks is a question that banks always face, and one of the daily issues to respond. This study also seeks to answer the question of how geographic diversification affects the performance of banks accepted in Tehran Stock Exchange. Twelve banks sampled by systematic sampling method were examined during the period 2011 to 2015. To examine the geographical diversification a number of cities in which the bank has been active until the year t (excluding the cities with headquarter) are chosen and the performance is measured by market share, net interest income, cost-to-income ratio, return on assets and non-interest income share. The results of model estimation show that geographical diversification has a significant effect on market share of bank and non-interest income.