Introducing Foreign Strategic Investors And Net Interest Margins In Chinese Banks

Abstract

Introducing foreign strategic investors is a vital step in China’s ownership reform of commercial banks. Using data from 81 commercial banks in China between 1995 and 2010, we investigate the effects of introducing foreign strategic investors and ownership structure on net interest margins. Three primary results emerge. First, introducing foreign strategic investors reduces net interest margins. Second, state-owned commercial banks have lower net interest margins than non-state-owned commercial banks. Third, we also find the effects of introducing foreign strategic investors on net interest margins in state-owned commercial banks are weaker than those in non-state-owned commercial banks. These results passed robustness tests.