We also explore theevidence of a non-linear relationship between bank diversification and financial stability because different degrees of diversificationmay affect a bank’s financial stability differently. Like Berger, Hasan, and Zhou (2010) and Gambacorta, Scatigna, and Yang (2014), whouse bank data to investigate the non-linearity of the effects of bank diversification on profitability, we predict that a low degree of bankdiversification increases bank financial stability but that an excessive level of diversification adversely affects this stability. Thus, weexpect to find a significantly nonlinear (i.e., inverted U-shaped) relationship between bank diversification and bank financial stability.