The Influence Of Interest Rate Marketization On The Stock Price Of Bank

Chinese interest rate marketization is a gradual reform. Since1996, the People’s Bank of China allows the interbank market lending rate to float freely, Chinese interest rate marketization has lasted18years. July10,2013, the People’s Bank of China announced the cancellation of the lower limit of lending rates. And now, China has completed the open of the money market, bond market, foreign currency deposit and loan market and loans market. However, our interest rate liberation has not been finalized, the upper limit of the deposit interest rate has not been fully liberalized.Interest rate liberation is the major of the financial markets reform. The commercial banks as the intermediaries of financial market is connected with financial markets. Therefore, the liberation of interest rate will infect commercial banks. But the research on the interest rate marketization in our country is mostly concentrated on the Necessity, the mode selection,the infect on bank, etc. There is few people study the influence of interest rate marketization on the the bank’s share price. What’s more, there is less people study the relationship between the cancellation of limited rate and the bank’s share price. So study if the cancellation of limited deposit and lending rates will impact on the bank’s share price is very important. For these reasons, I will use event study to study the influence of the cancellation of limited rate on the the bank’s share price.Firstly, this paper analyzes the process of influence of interest rate to share price. Secondly, presents the relevant theories of Chinese interest rate marketization and the relevant theories of the influence of interest rate marketization on banks. Then based on the date in2004and2013study the influence of the cancellation of limited rate on the the bank’s share price separately. The results show the cancellation of the limit to deposit and lending rates in2004making the stock price of banks generate significant abnormal returns and lasted on the entire event window; the cancellation of the lower limit to lending rates in2013also making the stock price of bank generate significant abnormal returns, but it just lasted a very short period of time. From the entire events window, the impact is not significant. And this article divided the sixteen Stock-market listed bank into state-controlled banks and non-state-controlled banks, and study the impact on China’s banking sector when our deposits and loans rate limiting has cancellation separately. The results show that, compared to state-controlled banks, it has a greater impact on non-state-controlled bank.Final analysis the empirical findings with China’s actual situation and given the appropriate policy recommendations.