The Threshold Effect Of Institutional Quality Impacting Commercial Bank Net Interest Margin

As the main source of profit for China's commercial banks,under the background of deepening reform of interest rate liberalization and the banks industry entering into its tough time,insistently forcing the commercial banks to shrink interest margin for decreasing the financing cost of entity enterprises,while at the same time ignoring the crucial external factor as regime,could probably make China's suffering banking industry even worse.Existing studies by scholars both at home and abroad mainly focus on the influence of internal factors of banks towards net interest margin,while with a lack of analysis of institutional quality's effect upon commercial banks' net interest margin.On the basis of the aforesaid analysis,this thesis conducts the research of regime quality's influence towards commercial banks' net interest margin,which could help to know the extent to which China's commercial banks could shrink its net interest margin in the process of institutional change,and provide the basis for the government and banking regulation & supervision institutions to formulate economic policies in adjusting economic structures.Firstly this thesis explores and researches the influence of institutional quality towards commercial banks' net interest margin at different institutional stages from the theoretical aspect.Besides,based on classical model theory,this thesis discusses that when institutional quality crosses certain limitations,institutional quality could directly influence net interest margin positively,and rather affect net interest margin through relevant courses.Secondly,based on the nonlinear influencing characteristics of the threshold effect of institutional quality upon commercial banks' net interest margin,and the analysis that institutional quality could indirectly affect the net interest margin through mediating variable when crossing certain institutional threshold,this thesis establishes the threshold effect measurement model for the influence of institutional quality towards commercial banks' net interest margin and measurement model for the influencing courses of institutional quality towards net interest margin.Finally,based on the panel data of 705 commercial banks that belong to 15 great commercial banks in 47 countries,the regression analysis has been carried out on the influence of institutional quality towards net interest margin.And the result of studies has shown that:(1)there is an obvious non-linear threshold effect between institutional quality and commercial bank net interest margin.Full sample data of commercial bank shows that they have a U-shape relationship,which means the impact becomes positive,inconspicuously negative,and obviously negative with the promotion of institutional quality.Although developed countries and developing countries both have this threshold effect,they present different basic characteristics.With the increase of institutional quality in developed countries,the impact is obviously negative with marginal efficiency.Moreover,with the increase of institutional quality in developing countries,the impact has a tendency of inconspicuously positive,inconspicuously negative,obviously negative with an increasing marginal efficiency of obviously negative impacts.(2)through studying the samples of countries that own the institutional qualities above 48.4,it is discovered that: when crossing certain institutional threshold,institutional quality could not only directly affect commercial banks' net interest margin negatively,but also influence commercial banks' net interest margin through mediate variables.Specifically: institutional quality has a directly negative effect on commercial banks' net interest margin through RIAKA,HHI,EFFI,LIQUID,CREDIT,FEE,IMP,RESER and etc.Nevertheless,institutional quality has a directly positive effect on commercial banks' net interest margin through LOANR.through reaching on samples of developed countries of institutional qualities above 77.2 and developing countries of institutional qualities above 48.4,it is discovered that in developing countries,when institutional quality crosses certain limitations,it could directly affect net interest margin negatively.Meanwhile,institutional quality has an indirectly positive influence upon commercial banks' net interest margin through RIAKA,HHI,EFFI,LIQUID,CREDIT,FEE,IMP,RESER and etc.Nevertheless,institutional quality affects indirectly the commercial banks' net interest margin in a positive way through LOANR.But this conclusion is failed to be achieved in developed countries.(3)the level of institutional quality in China is still very low,being a phase that institutional quality has impacts on decreasing commercial bank net interest margin.In the phase of interest rate marketization,the industrial structure upgrading and dispose of a plenty of "zombie" companies,the core of developing intermediary business promotion function and reducing the commercial bank service entity economy of net interest margin of commercial Banks is to perfect the laws and regulations,improve the efficiency of law enforcement and institutional quality.