The purpose of the study is to investigate whether bank diversification influences borrowing firms’ financial constraints on investment decisions. It also analyzes whether the different dimensions of bank diversification could alleviate financial constraints to firm investment. Further, the role of bank diversification in achieving firm financial sustainability is explored. By applying the Two-step System GMM, this study examines the effect of changes in bank diversification on financial constraints to borrowing firm investment in a reduced-form investment model with a sample of 810 listed firms in Taiwan over the period 1997–2019. The empirical findings indicate that firms are financially constrained as well as there being a positive relationship between cash flow and investment among Taiwanese listed firms. Additionally, bank diversification significantly reduces the investment-cash flow sensitivity of firms, suggesting that bank diversification mitigates the financial constraints to borrowing firms. Moreover, the multi-diversification of a bank compared to single-diversification will have greater impact on mitigating the firms’ financial constraints on investment. Thus, bank diversification strategies are proposed in a bank-based financial system, leading to the easing of the borrowing firms’ financial constraints to investments.

Do Mutual Fund Managers Time Market Sentiment?

This study examines whether companies performance based on dividend yield are effective in the stock-dividend-prevailing markets. Besides adopting various dividend yield rankings, this study incorporates some financial variables to build portfolios. Empirical results show that for the 2003 to 2007 period, cash dividend companies yielded significantly higher annual returns than stock dividend companies, market indices, and other types of dividend yield. The results remain significant after risk adjustments. Finally, the findings of this study are robust various factors, such as the 2008 financial tsunami, and the performance of companies over multiple years. Those results imply that the cash-dividend-yield ranking is an indicator of future returns in the Taiwan market.