Journal of Finance Vol. 36 No. 5 1981
Market Interest Rates and Commercial Bank Profitability: An Empirical Investigation
Abstract
The widespread notion that commercial banks “borrow short and lend long” implies that sharp market interest rate increases may induce a significant number of banking failures. This paper develops a method for estimating average asset and liability maturities for a sample of large money center banks. Regression models are tested to determine if market rate fluctuations have a significant impact on bank profitability. The conclusion is negative: large banks have effectively hedged themselves against market rate risk by assembling asset and liability portfolios with similar average maturities.
- DOI
- 10.1111/j.1540-6261.1981.tb01078.x
- Volume
- 36
- Issue
- 5
- Pages
- 1085-1101
- Language
- en
- Sources
- crossref openalex