Title: Determinants of interest rate spread and the moderating role of income diversity: the case of Vietnamese commercial banks

Authors: Vo Thi Quy; Pham Dang Tuan

Addresses: School of Economics, Finance and Accounting, International University, Ho Chi Minh City, Vietnam; Vietnam National University, Quarter 6, Linh Trung Ward, Thu Duc City, Ho Chi Minh City, 70000, Vietnam ' School of Business, International University, Ho Chi Minh City, Vietnam; Vietnam National University, Quarter 6, Linh Trung Ward, Thu Duc City, Ho Chi Minh City, 70000, Vietnam; Joint Stock Commercial Bank for Investment and Development of Vietnam, Saigon Branch, 271 An Duong Vuong Street, Ward 3, District 5, Ho Chi Minh City, 70000, Vietnam

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.

Keywords: IRS; interest rate spread; bank characteristics; income diversity; macroeconomic factors; Vietnam.

DOI: 10.1504/JGBA.2023.138505

Journal for Global Business Advancement, 2023 Vol.16 No.2, pp.159 - 179

Received: 01 Dec 2023
Accepted: 16 Jan 2024
Published online: 08 May 2024 *

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