Examine Banks’ Share Price Sensitivity Due to Interest Rate Changes: Emerging Markets and Advanced Countries

International Conference on Economics, Business Innovation IPEDR vol.38 (2012) © (2012) IACSIT Press, Singapore

5 Pages Posted: 7 Feb 2013

See all articles by Reza Tahmoorespour

Reza Tahmoorespour

University Putra Malaysia- Faculty of Economics and Management

Aref Mahdavi Ardekani

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (LAPE); Centre d'Economie de la Sorbonne (CES)

Date Written: 2012

Abstract

This study examines the impacts of interest rate on banks’ return in 14 international markets. This research covers seven financial ratios as dependent variables as well as the return of the bank. Moreover, size of the banks is a control variable. The sample of data is from 2001 until the end of 2010 and all the ratios collected annually. LM and Hausman test carried out and the results indicate that the data is Random Panel. The regression (OLS) results demonstrated that the behavior of banks towards the changes in interest rate heavily depends on the market that the banks are operating. Since there are several unique economical and financial characteristics for each country, the reaction of banks to changes in interest rate varies from one market to another. Regarding the size of the bank as control variable, only for five 5 out of 14 of countries there is a significant impact of size on the bank’s return.

Keywords: bank return, Interest rate, financial ratios, monetary policy, emerging markets, advanced markets, bank risk, control variable, size of the bank, total assets

JEL Classification: C1, C3, E4, G2

Suggested Citation

Tahmoorespour, Reza and Mahdavi Ardekani, Aref, Examine Banks’ Share Price Sensitivity Due to Interest Rate Changes: Emerging Markets and Advanced Countries (2012). International Conference on Economics, Business Innovation IPEDR vol.38 (2012) © (2012) IACSIT Press, Singapore. Available at SSRN: https://ssrn.com/abstract=2212282

Reza Tahmoorespour

University Putra Malaysia- Faculty of Economics and Management ( email )

43400 UPM Serdang
Selangor
Serdang, Selangor 43400
Malaysia

Aref Mahdavi Ardekani (Contact Author)

University of Limoges - Laboratoire d'Analyse et de Prospectives Économiques (LAPE) ( email )

5 rue Félix Eboué BP3127
3 Rue Chaudron
Limoges, 87000
France

Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

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