Determinants of interest rate spread and the moderating role of income diversity: the case of Vietnamese commercial banks Online publication date: Wed, 08-May-2024
by Vo Thi Quy; Pham Dang Tuan
J. for Global Business Advancement (JGBA), Vol. 16, No. 2, 2023
Abstract: The banking industry is an essential component of the overall economy. The difference in interest rates between a nation's lending rates and deposit rates at bank is referred to as the interest rate spread (IRS). The study investigates the impact of both bank specifics and macroeconomic factors on the IRS of 25 banks from 2008 to 2020 and the two-step system generalised method of moments (GMM) estimator for dynamic panel data is applied. The study tests the moderating role of income diversity on the relationship between bank characteristics and IRS. The researchers found that income diversity (ID) impacts positively and significantly, while cost efficiency, bank size, non-performance loans, and liquidity risk have an insignificant impact on the IRS. Income diversity significantly increases the impact of cost efficiency, and non-performance loans and it reduces the impact of liquidity risk on IRS. These findings provide valuable insights into the efficacy of the banking sector in Vietnam.
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