Research on the Influence of Interest Rate Liberalization on Commercial Banks’ Profitability in China
PDF

Keywords

Interest rate liberalization
Profitability
Commercial banks

DOI

10.26689/pbes.v4i5.2647

Abstract

In order to explore the influence of interest rate liberalization on profitability, an empirical analysis is carried out with the panel data of commercial banks in China from 2009 to 2019. Then, the heterogeneity of the impact is studied among different banks. The results show that, first, interest rate liberalization and commercial banks’ profitability have an inverted U-shaped relationship, whereby interest rate liberalization would increase the profitability of banks in the early stage but would reduce the profitability after reaching a peak inflection point at the later stage. Secondly, the impact varies among different banks, being more significant in urban commercial banks and large state-owned banks.

References

McKinnon RI, 1973, Money and Capital in Economic Development, The Brookings Institution, Washington, D.C.

Shaw E, 1973, Financial Deepening in Economic Development, Oxford University Press, New York.

Xu B, Zheng C, 2018, Analysis of the Influential Factors on the Profitability of Chinese Commercial Banks under the Background of Interest rate liberalization: Based on the Empirical Research of 16 Listed Commercial Banks. Nanjing Journal of Social Sciences, (03): 31-37.

Chen L, 2020, An Empirical Study on the Impact of Interest rate liberalization on the Credit Risk of Joint-Stock Banks-Based on Panel Data of Six Joint-Stock Banks. China Journal of Commerce, (04): 70-72.

Zhang N, 2018, Research on Interest Rate Risk Management of Commercial Banks under the Background of Interest Rate Liberalization. University of International Business and Economics.

Ba S, Hua Z, Zhu Y, 2012, International Comparison of Interest Rate Liberalization: Path, Performance and Market Structure. Journal of Central China Normal University (Humanities and Social Sciences), 51(05): 33-46.

Cheng G, 2016, Research on the Influence of Individual Factors of Commercial Banks on Net Interest Margin under the Marketization of Interest Rate. Market Modernization, (11): 114-116.

Huang X, Li X, Zeng M, 2016, The Impact of Interest Rate Liberalization on the Profits of Commercial Banks-Based on the Analysis of ICBC. Accounting Learning, (10): 231-233.

Peng J, Wang S, Guan T, 2016, Does Interest Rate Liberalization Narrow Interest Margins of Commercial Bank? Empirical Evidence Based on Chinese Banking Industry. Journal of Financial Research, (07): 48-63.

Xiao X, Wu Y, 2011, The Impact of America’s Market-based Interest Rate Reform on the Banking Sector. Studies of International Finance, (01): 69-75.

Shen C, Zhao S, Li Y, 2020, Interest Rate Liberalization, Non-interest Income and Net Interest Margin of Banks – The Different Influence Paths of Classified Non-interest Income. Statistical Research, 37(05): 68-81.

Tao X, Chen M, 2013, Measure and Reform Implications of China’s Interest Rate Liberalization. Journal of Zhongnan University of Economics and Law, (03): 74-79, 160.

Zhang X, Liang Q, 2010, On the Performance of China’s Interest Rates Liberalization. The Journal of Quantitative & Technical Economics, 27(06): 35-46.

Zhao S, Chen Q, 2019, Interest Rate Liberalization and the Transmission of Monetary Policy through Bank Lending Channel. Modern Economic Science, 41(04): 109-117.