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The impact of market power and funding strategy on bank-interest margins

The impact of market power and funding strategy on bank-interest margins
The impact of market power and funding strategy on bank-interest margins

This paper investigates the implications of market power and funding strategics for bank-interest margins, using a sample of 978 banks in 55 emerging and developing countries over an eight-year period. 2000- 2007. We provide additional insight by examining the complex interlocking of three key variable? that arc important for regulators: the degree of market power, funding sources and bank performance. The result? show that market power increases when banks use internal funding to diversify into non-interest income- generating activities. We also find that the high net-interest margins of banks in emerging and developing countries can be explained by the degree of market power, credit risk, and implicit interest payments. In addition, our results suggest that interest margins among banks with market power arc significantly more sensitive to internally generated funds than they arc to deposit and wholesale funding.

78-98
Taylor & Francis
Amidu, Mohammed
84e5194f-4087-4dd4-b009-89bbd2dfdb3f
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Girardone, C.
Hamill, P.A.
Wilson, J.O.S.
Amidu, Mohammed
84e5194f-4087-4dd4-b009-89bbd2dfdb3f
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Girardone, C.
Hamill, P.A.
Wilson, J.O.S.

Amidu, Mohammed and Wolfe, Simon (2016) The impact of market power and funding strategy on bank-interest margins. In, Girardone, C., Hamill, P.A. and Wilson, J.O.S. (eds.) Contemporary Issues in Financial Institutions and Markets. Taylor & Francis, pp. 78-98.

Record type: Book Section

Abstract

This paper investigates the implications of market power and funding strategics for bank-interest margins, using a sample of 978 banks in 55 emerging and developing countries over an eight-year period. 2000- 2007. We provide additional insight by examining the complex interlocking of three key variable? that arc important for regulators: the degree of market power, funding sources and bank performance. The result? show that market power increases when banks use internal funding to diversify into non-interest income- generating activities. We also find that the high net-interest margins of banks in emerging and developing countries can be explained by the degree of market power, credit risk, and implicit interest payments. In addition, our results suggest that interest margins among banks with market power arc significantly more sensitive to internally generated funds than they arc to deposit and wholesale funding.

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More information

Published date: 14 April 2016

Identifiers

Local EPrints ID: 413511
URI: http://eprints.soton.ac.uk/id/eprint/413511
PURE UUID: 98cb26e1-dc66-4318-8f0c-a738626b9ce7
ORCID for Simon Wolfe: ORCID iD orcid.org/0000-0001-9815-9535

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Date deposited: 25 Aug 2017 16:31
Last modified: 06 Jun 2024 01:34

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Contributors

Author: Mohammed Amidu
Author: Simon Wolfe ORCID iD
Editor: C. Girardone
Editor: P.A. Hamill
Editor: J.O.S. Wilson

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