Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks
Abundant literature infers the negative incidence of financial liberalization in the banking sector. As interest rate marketization is a reality in China, we empirically investigate the determinants of commercial banks’ financial performance using 10 listed Chinese commercial banks for 1999 to 2019....
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
SAGE Publishing
2022-05-01
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| Series: | SAGE Open |
| Online Access: | https://doi.org/10.1177/21582440221096648 |
| _version_ | 1828322254720598016 |
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| author | Dilesha Nawadali Rathnayake Yang Bai Pierre Axel Louembé Li Qi |
| author_facet | Dilesha Nawadali Rathnayake Yang Bai Pierre Axel Louembé Li Qi |
| author_sort | Dilesha Nawadali Rathnayake |
| collection | DOAJ |
| description | Abundant literature infers the negative incidence of financial liberalization in the banking sector. As interest rate marketization is a reality in China, we empirically investigate the determinants of commercial banks’ financial performance using 10 listed Chinese commercial banks for 1999 to 2019. Our findings suggest that net interest margin (NIM), non-performing loans (NPL), and asset size (LnAsset) are the key drivers of profitability in Chinese banks. Interestingly, for the sample of city banks observed, we find that bank performance is strongly driven by sound management of the assets and the retail interest margins. On the opposite, the joint-stock banks’ strong diversification leads to lower reliance on net interest margins. Our results also suggest that joint-stock banks’ asset size puts strong pressure on their overall performance and exert a diminishing return effect as their assets’ critical size generates proportional administrative expenses that hinder profitability. |
| first_indexed | 2024-04-13T18:38:16Z |
| format | Article |
| id | doaj.art-bfd1b8c6fc8b4816a444c7f3a1323084 |
| institution | Directory Open Access Journal |
| issn | 2158-2440 |
| language | English |
| last_indexed | 2024-04-13T18:38:16Z |
| publishDate | 2022-05-01 |
| publisher | SAGE Publishing |
| record_format | Article |
| series | SAGE Open |
| spelling | doaj.art-bfd1b8c6fc8b4816a444c7f3a13230842022-12-22T02:34:49ZengSAGE PublishingSAGE Open2158-24402022-05-011210.1177/21582440221096648Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share BanksDilesha Nawadali Rathnayake0Yang Bai1Pierre Axel Louembé2Li Qi3School of Economics, Shandong University of Technology, Zibo, P.R. ChinaBusiness School, Shandong University of Technology, Zibo, P.R. ChinaSchool of Accounting, Dongbei University of Finance & Economics, Dalian, P.R. ChinaSchool of Economics, Shandong University of Technology, Zibo, P.R. ChinaAbundant literature infers the negative incidence of financial liberalization in the banking sector. As interest rate marketization is a reality in China, we empirically investigate the determinants of commercial banks’ financial performance using 10 listed Chinese commercial banks for 1999 to 2019. Our findings suggest that net interest margin (NIM), non-performing loans (NPL), and asset size (LnAsset) are the key drivers of profitability in Chinese banks. Interestingly, for the sample of city banks observed, we find that bank performance is strongly driven by sound management of the assets and the retail interest margins. On the opposite, the joint-stock banks’ strong diversification leads to lower reliance on net interest margins. Our results also suggest that joint-stock banks’ asset size puts strong pressure on their overall performance and exert a diminishing return effect as their assets’ critical size generates proportional administrative expenses that hinder profitability.https://doi.org/10.1177/21582440221096648 |
| spellingShingle | Dilesha Nawadali Rathnayake Yang Bai Pierre Axel Louembé Li Qi Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks SAGE Open |
| title | Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks |
| title_full | Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks |
| title_fullStr | Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks |
| title_full_unstemmed | Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks |
| title_short | Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks |
| title_sort | interest rate liberalization and commercial bank performance new evidence from chinese a share banks |
| url | https://doi.org/10.1177/21582440221096648 |
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