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What Determines Interest Margins? The Case of Chinese Banks

In: Contemporary Issues in Banking

Author

Listed:
  • Ming Qi

    (China University of Petroleum (Beijing))

  • Jiawei Zhang

    (China University of Petroleum (Beijing))

Abstract

In this study, a sample of 116 Chinese domestic banks, comprising state-owned banks (SOBs), joint-stock banks (JSBs), city commercial banks(CCBs) and credit cooperatives, is used to investigate the interest margins of China’s banking industry. The results indicate that the credit risk is the major factor in enhancing the profitability of the Chinese domestic banks. On the other hand, the banks require high interest margins to compensate for the liquid, default and credit risk exposures. Following the liberalization of the banking industry, domestic banks do not hold as many liquid assets and loan loss provisions as before.

Suggested Citation

  • Ming Qi & Jiawei Zhang, 2018. "What Determines Interest Margins? The Case of Chinese Banks," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Myriam García-Olalla & Judith Clifton (ed.), Contemporary Issues in Banking, chapter 0, pages 239-251, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-319-90294-4_11
    DOI: 10.1007/978-3-319-90294-4_11
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    Cited by:

    1. Chen, Shenglan & Ma, Hui & Teng, Haimeng & Wu, Qiang, 2022. "Banking liberalization and corporate tax planning: Evidence from natural experiments," Journal of Corporate Finance, Elsevier, vol. 76(C).
    2. Md. Shahidul Islam & Shin-Ichi Nishiyama, 2020. "The Determinants of Net Interest Margins of Commercial Banks: Panel Evidence from China, India and Japan," Discussion Papers 2014, Graduate School of Economics, Kobe University.

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