Bank Interest Rate Margin, Portfolio Composition and Institutional Constraints

Li Xian Liu, Milind SATHYE

Research output: Contribution to journalArticle

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Abstract

This study empirically examines how the bank specific factors, macro-economic, and institutional variables impact interest margins in China’s banking sector. A panel data analysis of bank data for the period 1988–2015 was carried out. We found a significant association between credit quality, risk aversion, liquidity risk, and the proportion of corporate and industrial loans and the adjusted interest spread (AIS). GDP growth rate, inflation, and the proportion of national savings to the GDP were found to have significant association with the AIS. Furthermore, institutional variables were found to have a significant moderating effect on the AIS. We contribute to the literature by examining a unique context and a more accurate measure of bank interest margin not used in prior studies.
Original languageEnglish
Article number121
Pages (from-to)1-21
Number of pages21
JournalJournal of Risk and Financial Management
Volume12
Issue number3
DOIs
Publication statusPublished - 18 Jul 2019

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Margin
Interest rates
Institutional constraints
Portfolio composition
Institutional variables
Interest margin
Proportion
Credit
Macroeconomic variables
National saving
Panel data analysis
Banking sector
Moderating effect
GDP growth
Risk aversion
Liquidity risk
Specific factors
Inflation
Loans
China

Cite this

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Bank Interest Rate Margin, Portfolio Composition and Institutional Constraints. / Liu, Li Xian ; SATHYE, Milind.

In: Journal of Risk and Financial Management, Vol. 12, No. 3, 121, 18.07.2019, p. 1-21.

Research output: Contribution to journalArticle

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