LAUSR

Abstract This paper investigates the effects of income diversification on bank performance and how ownership structure affects this relationship. Using data on listed Tunisian banks during the 2008–2017 period, we find evidence that increased diversification improves bank performance, but the benefits of diversification are offset by the increased exposure to volatile noninterest income. We also observe that banks with concentrated ownership moderate the impact of diversification on performance in Tunisian banks. In addition, we highlight that diversified banks with ownership concentration diminish risk, suggesting that ownership concentration plays an important moderating role. Our results have important implications on bank managers and regulators in Tunisia as well as in similar emerging economies.