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Considering the fundamental function of commercial banks in the economy, which involves the facilitation of fund transfers from lenders to borrowers, it is imperative for these institutions to carry out this task in a manner that is both efficient and effective. This is crucial to fostering economic growth and enhancing social welfare. A bank's profitability has been a subject of scrutiny by researchers in many countries for decades. This study aims to analyze the impact of interest rate spread (IRS) and its mediating role in the relationship between bank-specific factors and the bank's profitability at the Commercial Bank of Vietnam. The data was collected from 2008 to 2020 for the 25 Commercial Banks using panel regression. The study found the positive effect of cost efficiency (CE), income diversity (ID), and liquidity risk (LIQ) on the IRS; however, bank size (BS), non-performing loan (NPL), provision of bad and doubtful debts (PL), asset structure (AS), non-interest expense (NIE), and economic conditions (ECD) do not impact the IRS statistically significantly. The study also confirms the IRS's mediating role. The study findings provide empirical evidence of the explaining and mediating role of the IRS on bank profitability. This study recommends that policymakers encourage Commercial Banks to diversify their income in order to avoid focusing on traditional activities, which can lead to credit overheating.

This paper aims to investigate the determinants or factors affecting the interest rate spread of private commercial banks in Bangladesh from 2013 to 2022. For the purpose of the study, the interest rate spread (IRS) of banks has been considered as a dependent variable while bank-specific factors and macroeconomic factors have been considered independent variables. Bank-specific factors are credit risk, bank size, operating cost ratio, liquidity risk, net interest income as a ratio of total income, capital adequacy ratio, and loan to deposit ratio while macroeconomic factors are Inflation and GDP. The Pooled Ordinary Least Square method (OLS), the Fixed Effect method (FE), the Random Effect method (RE), and the Generalized Least Square method (GLS) have been used to investigate the impact of the factors on interest rate spread. The results exhibit that bank-specific factors such as net interest income as a ratio of total income, and capital adequacy ratio are found to be statistically significant and positively impact the interest rate spread. In contrast, the results also exhibit that bank-specific factors such as bank size, operating expense ratio, and loan to deposit ratio are statistically significant and negatively impact the interest rate spread. Again, the results determine that the macroeconomic factor which is inflation found to be statistically significant and positively impacts the interest rate spread. The study’s findings will assist the banks’ regulatory body in formulating and developing strategies to maintain a satisfactory level of interest rate spread.

We examine the associations between audit partner pre-client and client-specific experience and audit quality using data from Taiwan, where signing audit partner names are disclosed. Using discretionary accruals and interest rate spreads to proxy for audit quality and perceptions of audit quality, respectively, we find that both pre-client and client-specific experience improve audit quality and creditor perceptions of audit quality. We also find that audit partner pre-client experience is positively associated with audit quality early in the engagement, but not when the partner has been with the client for at least five years. Our findings provide evidence consistent with the assumption underlying the Public Company Accounting Oversight Board’s decision to require the disclosure of engagement partner names. They also suggest that pre-client experience cannot completely mitigate the loss of client-specific knowledge when partner or audit firm turnover occurs.

This paper provides global evidence that oil price shocks have significant impacts on bank risk. Specifically, all three oil shocks, including oil supply shocks, aggregate demand shocks, and oil specific demand shocks, have positive impacts on bank risk. In particular, oil specific demand shocks have different impacts on bank risk in oil-importing versus oil-exporting countries and in normal times versus the financial crisis period. Moreover, we find that interest rate spread could significantly explain the impacts of oil shocks on bank risk for oil-exporting countries during normal times. Our main results remain valid in various robustness tests.This study provides important practical implications for policy makers, banks, and investors around the world.

PurposeThis paper investigates the viability of the relationship-oriented business model. Specifically, it examines the effects of bank customers' satisfaction, loyalty, and trust in bank advisors on two client-level performance measures; client-level non-interest revenue, and client-level revenue on net interest spread. It further investigates how effects are moderated by differences in clients' risk tolerance and financial literacy.Design/methodology/approachThe findings are based on analyses of a data set that combines survey data (collected from 13,525 bank clients in 2013) with bank record data from each respondent. The cross sectional data is analyzed using OLS-regression and structural equation modeling.FindingsOverall, the findings are that the relationship banking model generates non-interest revenue, but not revenue on net interest spread. In more detail, findings show that trust has a positive direct effect on client-level non-interest revenue. Furthermore, trust mediates the entire effect of satisfaction and loyalty on client-level non-interest revenue. Customer satisfaction and loyalty do not lead to enhanced client-level non-interest revenue if there is little trust in bank advisors. Findings further show that the relevance of trust for non-interest revenue is higher for clients with high risk tolerance and high financial literacy. Satisfaction, loyalty, and trust have no effect, however, on client-level revenue on net interest spread.Originality/valueWhile previous literature mainly has used subjective intentions (e.g., repurchase behavior) as operationalization of performance, this paper combines subjective survey data and objective performance data, allowing the investigation of how the customer relationship model affects actual performance. Furthermore, the paper investigates the relational banking model's effect on non-interest and net interest spread revenue, and we show that the relational banking model generates only non-interest revenue, and not net interest spread revenue. The fine-grained client-level data also allows the investigation on how the effect of trust on client-level performance differs among client groups with different cognitive characteristics (i.e., risk tolerance and financial literacy).

We develop dynamic binary probit models and apply them for predicting U.S. recessions using the interest rate spread as the driving predictor. The new models use lags of the binary response (a recession dummy) to forecast its future values and allow for the potential forecast power of lags of the underlying conditional probability. We show how multiperiod-ahead forecasts are computed iteratively using the same one-period-ahead model. Iterated forecasts that apply specific lags supported by statistical model selection procedures turn out to be more accurate than previously used direct forecasts based on horizon-specific model specifications.

This article re-examines the association between democratization and the cost of borrowing abroad in the first era of globalization. Using two representative datasets the literature offers but employing an improved method for panel event study, we find that democratization's impact on the costs of foreign borrowing is uncertain. In one case, the estimated coefficients are similar to the sign and magnitude of the original study but with larger standard errors, rendering the impact statistically insignificant. In the other case, the estimated coefficients hover around zero and are not statistically different from zero.

This study investigates the effect of macroeconomic and bank-specific factors on the bank interest rate spread (IRS) of six Western Balkan countries (referred to as WB6). We applied the Panel Vector Autoregression (Panel VAR) model to separately analyze the impact of these two sets of factors for 2005 to 2022 using two-panel datasets from 110 banks. The results from the two models show that the IRS is significantly influenced by GDP per capita and the unemployment rate, while other factors, such as bank concentration, performance indicators, and non-performing loans, show limited direct effects. The study identifies a notable gap in the existing literature by emphasizing how macroeconomic and bank-specific variables, particularly in transition economies, can simultaneously affect the IRS. The research highlights the distinctive financial dynamics within the WB6 countries and the relevance of comprehending the region’s banking sector characteristics. It contributes to academic and policy discussions on the significance of financial stability and market competitiveness in determining the bank IRS. The findings can be helpful for banking regulators and policymakers in the Western Balkans seeking to foster an efficient and competitive banking environment. JEL Classification: C33, E43, G21.

This study analyzes the factors responsible for the lower net interest rate at commercial banks located in Indonesia, Thailand and the Philippines. Data were collected from 35, 10 and 13 commercial banks in Indonesia, Thailand, and the Philippines, respectively, from 2012 to 2020 using the Fixed effect model. The Simultaneous Equation Model was used to analyze the macroeconomic factors and banks’ specific characteristics towards Loan and Time Deposit rates. The result showed that macroeconomic factors, such as the inflation rate, significantly affect loan and time deposit rates in these countries. In Indonesia, bank competition should be reduced and banks’ stability should be higher to minimize Net Interest Margin Spread (difference between Loan Rate and Deposit Rate). In the Philippines, banks should increase their capital and liquidity. So, they will be more confident and prudent in lowering their NIM. Thailand’s banking industry has unique characteristics with high monopoly power. The bigger and greater the market share, the larger the interest rate spread on customers. Therefore, regulators in each country need to consider these important variables when making decisions on lowering the net interest rates by banks to enhance social welfare.