THE IMPACT OF LOAN SIZE AND GLOBAL FINANCIAL CRISIS ON INTEREST RATE SPREADS IN PAKISTAN’S COMMERCIAL BANKING SECTOR

Saadia Irshad, Shahbaz Ahmad

Abstract


This study investigates the effect of loan size and global
financial crisis on interest rate spreads (IRS) in Pakistan’s banking
sector. This study employs unbalanced panel data set of 22 commercial
banks in Pakistan for the period 2005-2014. By using fixed effect
regression model, it is found that loan size is negatively affected by
the IRS which indicates that as loan size increases, IRS is reduced. In
the same vein, bank size has a negative but insignificant effect on IRS.
Liquidity and credit risks are negatively influenced by banking
spreads, whereas operating cost has a positive effect on IRS. Return
on assets (ROA) has no effect on IRS. Finally, recent global financial
crisis is also positively influenced by banking spreads which indicates
that the financial system of Pakistan is globally integrated.


Full Text:

PDF

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.