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Bank Interest Rate Margin, Portfolio Composition and Institutional Constraints

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  • Li Xian Liu

    (College of Business, Law & Governance, James Cook University, Townsville 4811, Australia)

  • Milind Sathye

    (Faculty of Business, Government & Law, University of Canberra, Canberra 2601, Australia)

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.

Suggested Citation

  • Li Xian Liu & Milind Sathye, 2019. "Bank Interest Rate Margin, Portfolio Composition and Institutional Constraints," JRFM, MDPI, vol. 12(3), pages 1-21, July.
    • Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:3:p:121-:d:249615
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    Cited by:

    1. Li Xian Liu & Fuming Jiang & Milind Sathye & Hongbo Liu, 2021. "Are Foreign Banks Disadvantaged Vis-À-Vis Domestic Banks in China?," JRFM, MDPI, vol. 14(9), pages 1-36, August.

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