IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v12y1987i1p69-90.html
   My bibliography  Save this article

Australian Finance Company Profitability: Tests of the Hedging and S.C.P. Models

Author

Listed:
  • R. W. McShane

    (Department of Economics, University of Newcastle.)

  • I. G. Sharpe

    (Department of Finance, University of New South Wales.)

Abstract

The paper tests the hedging and structure-conduct-perfor Mance (S.C.P.) models in the context of Australian finance company profit margins. Econometric results from pooled time-series/cross-section data were consistent with the S.C.P. model and inconsistent with the hedging model. Finance company profits are positively related to market power and the degree of risk aversion, and negatively related to the level of interest rates and provisions made for bad and doubtful debts.

Suggested Citation

  • R. W. McShane & I. G. Sharpe, 1987. "Australian Finance Company Profitability: Tests of the Hedging and S.C.P. Models," Australian Journal of Management, Australian School of Business, vol. 12(1), pages 69-90, June.
    • Handle: RePEc:sae:ausman:v:12:y:1987:i:1:p:69-90
    DOI: 10.1177/031289628701200106
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/031289628701200106
    Download Restriction: no
    File URL: https://libkey.io/10.1177/031289628701200106?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Flannery, Mark J, 1983. "Interest Rates and Bank Profitability: Additional Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 355-362, August.
    2. Hendry, David F & Mizon, Grayham E, 1978. "Serial Correlation as a Convenient Simplification, not a Nuisance: A Comment on a Study of the Demand for Money by the Bank of England," Economic Journal, Royal Economic Society, vol. 88(351), pages 549-563, September.
    3. repec:bla:ecorec:v:49:y:1973:i:127:p:481-84 is not listed on IDEAS
    4. Gaskins, Darius Jr., 1971. "Dynamic limit pricing: Optimal pricing under threat of entry," Journal of Economic Theory, Elsevier, vol. 3(3), pages 306-322, September.
    5. J. H. Hatch & M. K. Lewis, 1973. "Economies of Scale in Australian Banking: A Reply," The Economic Record, The Economic Society of Australia, vol. 49(3), pages 481-484, September.
    6. Ho, Thomas S. Y. & Saunders, Anthony, 1981. "The Determinants of Bank Interest Margins: Theory and Empirical Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(4), pages 581-600, November.
    7. repec:bla:ecorec:v:47:y:1971:i:117:p:17-37 is not listed on IDEAS
    8. Flannery, Mark J, 1981. "Market Interest Rates and Commercial Bank Profitability: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 36(5), pages 1085-1101, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tuna, Gulcay & Almahadin, Hamed Ahmad, 2021. "Does interest rate and its volatility affect banking sector development? Empirical evidence from emerging market economies," Research in International Business and Finance, Elsevier, vol. 58(C).
    2. Iftekhar Hasan & Sudipto Sarkar, 2002. "Banks' option to lend, interest rate sensitivity, and credit availability," Review of Derivatives Research, Springer, vol. 5(3), pages 213-250, October.
    3. Gomez, Matthieu & Landier, Augustin & Sraer, David & Thesmar, David, 2021. "Banks’ exposure to interest rate risk and the transmission of monetary policy," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 543-570.
    4. Pankaj Sinha & Sakshi Sharma, 2016. "Determinants of bank profits and its persistence in Indian Banks: a study in a dynamic panel data framework," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 7(1), pages 35-46, March.
    5. Carlo Altavilla & Miguel Boucinha & José-Luis Peydró & Thorsten BeckManaging Editor, 2018. "Monetary policy and bank profitability in a low interest rate environment," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(96), pages 531-586.
    6. Molyneux, Philip & Reghezza, Alessio & Xie, Ru, 2019. "Bank margins and profits in a world of negative rates," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    7. Saha, Asish & Subramanian, V. & Basu, Sanjay & Mishra, Alok Kumar, 2009. "Networth exposure to interest rate risk: An empirical analysis of Indian commercial banks," European Journal of Operational Research, Elsevier, vol. 193(2), pages 581-590, March.
    8. Jaakko Sääskilahti, 2018. "Retail Bank Interest Margins in Low Interest Rate Environments," Journal of Financial Services Research, Springer;Western Finance Association, vol. 53(1), pages 37-68, February.
    9. Massimo Giulidori & Enzo Dia, 2009. "The Determinants of Bank Interest Margins: Estimates of a Dynamic Model," Working Papers 157, University of Milano-Bicocca, Department of Economics, revised Mar 2009.
    10. Pariyada Sukcharoensin, 2013. "Time-Varying Market, Interest Rate and Exchange Rate Risks of Thai Commercial Banks," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(1), pages 25-45.
    11. Hamed Ahmad Almahadin, 2022. "Spillover Effects of US Monetary Policy on Banking Development: Evidence from the Asian Region," Global Business Review, International Management Institute, vol. 23(1), pages 7-19, February.
    12. Claudio Borio & Leonardo Gambacorta & Boris Hofmann, 2017. "The influence of monetary policy on bank profitability," International Finance, Wiley Blackwell, vol. 20(1), pages 48-63, March.
    13. Itamar Drechsler & Alexi Savov & Philipp Schnabl, 2021. "Banking on Deposits: Maturity Transformation without Interest Rate Risk," Journal of Finance, American Finance Association, vol. 76(3), pages 1091-1143, June.
    14. Md. Shahidul Islam & Shin-Ichi Nishiyama, 2016. "The Determinants of Bank Profitability: Dynamic Panel Evidence from South Asian Countries," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(3), pages 1-6.
    15. repec:zbw:bofrdp:2002_015 is not listed on IDEAS
    16. Beckmann, Rainer, 2007. "Profitability of Western European banking systems: panel evidence on structural and cyclical determinants," Discussion Paper Series 2: Banking and Financial Studies 2007,17, Deutsche Bundesbank.
    17. M. Cary Collins & Van Son Lai & James E. McNulty, 1997. "Thrifty Viability and Traditional Mortgage Lending: A Simultaneous Equations Analysis of the Risk-Return Trade-Off," Journal of Real Estate Research, American Real Estate Society, vol. 13(2), pages 155-176.
    18. Daniel Hoechle & Stefan Ruenzi & Nic Schaub & Markus Schmid, 2018. "Financial Advice and Bank Profits," The Review of Financial Studies, Society for Financial Studies, vol. 31(11), pages 4447-4492.
    19. Daniel Goyeau & Alain Sauviat & Amine Tarazi, 2002. "Rentabilité bancaire et taux d'intérêt de marché. Une application aux principaux systèmes bancaires européens sur la période 1988-1995," Revue d'économie politique, Dalloz, vol. 112(2), pages 275-291.
    20. Skander Van den Heuvel, 2006. "The Bank Capital Channel of Monetary Policy," 2006 Meeting Papers 512, Society for Economic Dynamics.
    21. Aykut Ekinci, 2016. "The Effect of Credit and Market Risk on Bank Performance: Evidence from Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 427-434.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:12:y:1987:i:1:p:69-90. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.