Why are Net-Interest Margins Across Countries so Different?

51 Pages Posted: 25 Jan 2010 Last revised: 6 Mar 2015

See all articles by Andreas Dietrich

Andreas Dietrich

Lucerne University of Applied Sciences and Arts

Gabrielle Wanzenried

Institut für Finanzdienstleistungen Zug (IFZ)

Rebel A. Cole

Florida Atlantic University

Date Written: March 5, 2015

Abstract

In this study, we use panel data from 121 countries over the period 1999-2012 to provide new evidence regarding why bank margins differ across countries. More specifically, we test whether, and, if so, by how much, country-level governance variables and bank-specific factors explain the net-interest margins over time. We find that both bank-specific factors and country-level governance variables are important determinants of the interest margins. We also investigate whether these determinants vary by the level of economic development by analyzing developed and developing countries separately. We find significant differences in the determinants of margins between developed and developing countries.

Keywords: Commercial Bank, Corporate Governance, Creditors’ Rights, Developing Countries, Legal Origin, Net-Interest Margin, Market Development, Judicial Efficiency

JEL Classification: D21, G15, G21

Suggested Citation

Dietrich, Andreas and Wanzenried, Gabrielle and Cole, Rebel A., Why are Net-Interest Margins Across Countries so Different? (March 5, 2015). Available at SSRN: https://ssrn.com/abstract=1542067 or http://dx.doi.org/10.2139/ssrn.1542067

Andreas Dietrich (Contact Author)

Lucerne University of Applied Sciences and Arts ( email )

IFZ Institute of Financial Services Zug
P.O. Box 4332
Zug, CH-6304
Switzerland

Gabrielle Wanzenried

Institut für Finanzdienstleistungen Zug (IFZ) ( email )

Zug, CH-6304
Switzerland

Rebel A. Cole

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

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