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This paper examines the effect of loan portfolio diversification on Tunisian banks profitability over the period 2000-2015. By using panel data method, our finding, show that focusing on few sectors is more profitable than diversifying bank lending operations. In addition, we find that this negative impact is more pronounced in private banks. However, for foreign banks loan portfolio diversification is found to be positively associated with higher bank profitability. Also, we find support to the hypothesis stating that the positive effect of loan portfolio diversification is more pronounced for credit risky banks.
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Belguith et al. (2018) studied this question.
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