| Article Details : |
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| | | Article Name : | | | Analyzing the Determinants of Net Interest Margin
of Banks in Pakistan
| | Author Name : | | | TAYYABA RANI, FARMAN ULLAH KHAN, ZIA UR RAHMAN, USMAN ULLAH KHAN | | Publisher : | | | Bridge Center | | Article URL : |  | | | Abstract : | | | The purpose of this study is to examine the determinants of
Net Interest Margin of banks in Pakistan under financial variables
(operating expense, capital adequacy, bank size, credit risk, Liquidity
and the specific industry factor is Market power. In order to avoid
spurious regression, Levin, Lin and Chu (2002) tests was applied to
check the stationarity of the data. The study carried out Fixed effect
model and Hausman test using Panel data spanning from 2007 to
2013. The results suggested that operating expense has the positive and
most significant effect on banks’ interest margin. The higher costs of
operating expense are transferred to customers either by increasing the
lending rate or by reducing the deposit rate, resulting in higher interest
margin. Credit risk, Bank size and Liquidity and capital adequacy
have negative relationship with Interest Margin. | | Keywords : | | | Net interest margin, Panel data, Pakistan.
JEL classification: G21, P34 |
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