What factors drive interest rate spread of commercial banks? Empirical evidence from Kenya ,

By Maureen Were, Joseph Wambua. 2014

122 citations recorded by the source corpus.

The paper empirically investigates the determinants of interest rate spread in Kenya's banking sector based on panel data analysis. The findings show that bank-specific factors play a significant role in the determination of interest rate spreads. These include bank size, credit risk as measured by non-performing loans to total loans ratio, return on average assets and operating costs, all of which positively influence interest rate spreads. On the other hand, higher bank liquidity ratio has a negative effect on the spreads. On average, big banks have higher spreads compared to small banks. The impact of macroeconomic factors such as real economic growth is insignificant. The effect of the monetary policy rate is positive but not highly significant. The results largely reflect the structure of the banking industry, in which a few big banks control a significant share of the market.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/0fbe22bc56b391df676da6c6660c7b57bf1a52a7

How researchers see this paper

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In Accounting

1. Laxmi Koju
2. Ram Koju
3. Shouyang Wang

In Finance

1. Laxmi Koju
2. Ram Koju
3. Shouyang Wang

Citations in the corpus

• Macroeconomic and Bank-Specific Determinants of Non-Performing Loans: Evidence from Nepalese Banking System (2018, background): “Therefore, as shown by Ngugi (2001), Chirwa and Mlachila (2004), Siddiqui (2012), and Were and Wambua (2014), we assume a positive relationship between credit risk and interest spread.”