What Determines the Interest Margin? An Analysis of the German Banking System
AbstractThis paper analyzes the determinants of the interest margin of German banks over the period 1995–2007, explicitly addressing differences among different bank groups. We use three empirical models to focus on the following aspects: the time evolution of the interest margin, the average differences across groups, and the presence of autoregressive effects. For each model our results show that the interest margin can be mainly explained by market power and inefficiency, the influence of which is particularly high for cooperative banks. The Winner’s Curse phenomenon and the cross-subsidization strategy negatively influence the margin of private banks.
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Bibliographic InfoArticle provided by Credit and Capital Markets in its journal Credit and Capital Markets.
Volume (Year): 46 (2013)
Issue (Month): 4 ()
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Web page: http://www.credit-and-capital-markets.de/
German banks; Interest margin; Market power; Winner’s Curse; Germany;
Other versions of this item:
- Karmann, Alexander & Bühn, Andreas & Pedrotti, Marco, 2013. "What determines the interest margin? An analysis of the German banking system," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80029, Verein für Socialpolitik / German Economic Association.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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- Zarruk, Emilio R., 1989. "Bank spread with uncertain deposit level and risk aversion," Journal of Banking & Finance, Elsevier, vol. 13(6), pages 797-810, December.
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