In this article we empirically investigate various versions of the Dealership model for Greek commercial banks. In particular, we set out to uncover the banks' net interest margin determinants by controlling for bank-specific characteristics as well as controlling for changes in the macroeconomic environment. The findings indicate that the determination of net interest margins is broadly consistent with the Dealership model. In particular, there is strong evidence supporting the view that default, interest rate and liquidity risks are significant determinants of net interest margins.
Get full access to this article
View all access options for this article.
References
1.
Allen, L. (1988), 'The Determinants of Bank Interest Margins: A Note', Journal of Financial and Quantitative Analysis, 23(2): 231-35.
2.
Angbazo, L. (1997), 'Commercial Bank Net Interest Margins, Default Risk, Interest Rate Risk, and Off-Balance Sheet Banking', Journal of Banking and Finance, 21(6): 55-87.
3.
Baltagi, B. (1995), Econometric Analysis of Panel Data. New York: Wiley and Sons.
4.
Davis, H. and Y. Peles (1993), 'Measuring Equilibrating Forces of Financial Ratios ', The Accounting Review, October: 725-47.
5.
Demirguc-Kunt, A. and H. Huizinga (1998), 'Financial Structure and Bank Profitability', Policy Research Working Paper No. 1185, World Bank.
6.
— (1999), 'Determinants of Commercial Bank Net Interest Margins and Profitability: Some International Evidence', World Bank Economic Review, 13(1): 379-408.
7.
Flannery, M. and C. James (1984), `The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions', Journal of Finance , 39(2): 1141-53.
8.
Frecka, T. and C. Lee (1983), 'Generalised Financial Ratio Adjustment Processes and their Implications', Journal of Accounting Research, 21(1): 308-16.
9.
Ho, T. and A. Saunders (1981), 'The Determinants of Bank Interest Margins: Theory and Empirical Evidence', Journal of Financial and Quantitative Analysis, 16(4): 581-600.
10.
Ho, T. and H. Stoll (1981), 'Optimal Dealer Pricing under Transactions and Return Uncertainty', Journal of Financial Economics, 9(1): 47-73.
11.
King, R. and R. Levine (1993a), 'Finance, Entrepreneurship and Growth: Theory and Evidence', Journal of Monetary Economics, 32(3): 513-42.
12.
— (1993b), 'Finance and Growth: Schumpeter Might be Right ', Quarterly Journal of Economics, 108(3): 717-38.
13.
Lev, B. ( 1969), `Industry Averages as Targets for Financial Ratios', Journal ofAccounting Research, pp. 290-99.
14.
Levine, R. and S. Zervos (1998), 'Stock Markets, Banks, and Economic Growth', American Economic Review, 88(3): 537-58.
15.
McShane, R. and I. Sharpe (1985), 'A Time Series-Cross Section Analysis of the Determinants of Australian Trading Bank Loan-Deposit Interest Margins: 1962-1981', Journal of Banking and Finance, 9(1): 115-36.
16.
Stoll, H. (1978), `The Supply of Dealer Services in Securities Markets ', Journal of Finance, 33(4): 1132-533.
17.
White, G., A. Sondhi and D. Fried (1997), The Analysis and Use of Financial Statements, 2nd Edition. New York: Wiley and Sons.
18.
White, H. (1980), 'A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity', Econometrica , 48(4): 817-38.
