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Interest Rate Liberalization and Commercial Banks Profitability: Evidence from China

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  • Lai Ying

Abstract

Enhanced profitability is an important guarantee to improve the well-being of people and better exert the functions of commercial banks in promoting economic, social and production growth on the premise of the existence and development of commercial banks. Interest rate liberalization is one of the key factors which can affect the profitability of commercial banks. An empirical study is thus carried out on 16 Commercial banks (from 2007 to 2018) to analyze the impact of interest rate liberalization on the profitability of commercial banks. We draw main conclusions from this study- (1) the progress of interest rate liberalization has improved the profitability of banks. (2) This kind of impact is inverted U-shaped, that is, with the advancement of interest rate liberalization, the impact will be reversed in the future. (3) For banks of different sizes, the impact is different. Specifically, small and medium-sized banks are more sensitive to the liberalization of interest rates, while for larger banks, the impact is not strong.

Suggested Citation

  • Lai Ying, 2020. "Interest Rate Liberalization and Commercial Banks Profitability: Evidence from China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(5), pages 1-90, May.
    • Handle: RePEc:ibn:ijefaa:v:12:y:2020:i:5:p:90
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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