The impact of higher interest spread on the performance of banks in China
by Ning Ding; Yvette Essounga-Njan
International Journal of Services and Standards (IJSS), Vol. 8, No. 2, 2012

Abstract: The study analyses how higher interest spread resulting from price control by the Chinese government affects banks' profits in China. It provides in-depth empirical analyses of the determining factors of the banks' profits and discusses how artificially set higher interest spread impacts banks' performance in China. The paper uses a two-step model on the banking industry of China based on the dealership model developed by Ho and Saunders in 1981 and finds the oligopolistic market structure has a negative but not a significant relationship with the banks' profits before 2000. However, the market structure has positive contributions to the banks' profits after 2000 due to the higher interest spread artificially controlled by the government.

Online publication date: Sat, 27-Dec-2014

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