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The relationship between commercial banks' interest rates and loan sizes: evidence from a small open economy

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Abstract

Traditional finance theory argues that as the size of a loan expands, the interest rate on that loan rises to accommodate the increased risk associated with the loan. However, utilizing firm-level data of the Barbadian banking industry, it is observed that the smaller the loan's size, the greater the interest rate applied, and vice versa. Using a fixed effect panel data framework, this article also shows that the interest rate differences among loan sizes can be mainly explained by the borrower's characteristics for local banks while for foreign banks, its operating characteristics were the most important factors.

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  • W. Moore & R. Craigwell, 2003. "The relationship between commercial banks' interest rates and loan sizes: evidence from a small open economy," Applied Financial Economics, Taylor & Francis Journals, vol. 13(4), pages 257-266.
    • Handle: RePEc:taf:apfiec:v:13:y:2003:i:4:p:257-266
    DOI: 10.1080/09603100110116434
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    Cited by:

    1. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2017. "European Small Business Finance Outlook: December 2017," EIF Working Paper Series 2017/46, European Investment Fund (EIF).
    2. Kraemer-Eis, Helmut & Lang, Frank & Torfs, Wouter & Gvetadze, Salome, 2016. "European Small Business Finance Outlook: June 2016," EIF Working Paper Series 2016/35, European Investment Fund (EIF).
    3. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2019. "European Small Business Finance Outlook: June 2019," EIF Working Paper Series 2019/57, European Investment Fund (EIF).
    4. Kraemer-Eis, Helmut & Lang, Frank & Torfs, Wouter & Gvetadze, Salome, 2015. "European Small Business Finance Outlook: December 2015," EIF Working Paper Series 2015/32, European Investment Fund (EIF).
    5. Kraemer-Eis, Helmut & Lang, Frank & Torfs, Wouter & Gvetadze, Salome, 2017. "European Small Business Finance Outlook: June 2017," EIF Working Paper Series 2017/43, European Investment Fund (EIF).
    6. Anh L.N. Ngo, 2019. "Index of Financial Inclusion and the Determinants: An Investigation in Asia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(12), pages 1368-1382, December.
    7. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2018. "European Small Business Finance Outlook: December 2018," EIF Working Paper Series 2018/53, European Investment Fund (EIF).
    8. Zdeněk Toušek & Barbora Malinská & Martin Prokop & David Procházka, 2021. "The Effect of Financial Leverage on Operating Performance: Evidence from the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(4), pages 381-401.
    9. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2019. "European Small Business Finance Outlook: December 2019," EIF Working Paper Series 2019/61, European Investment Fund (EIF).
    10. Zdeněk Toušek & Barbora Malinská & Martin Prokop & David Procházka, . "The Effect of Financial Leverage on Operating Performance: Evidence from the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 0.
    11. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2018. "European Small Business Finance Outlook: June 2018," EIF Working Paper Series 2018/50, European Investment Fund (EIF).

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