Banks' Core Deposits and Net Interest Margin: Do Size and Ownership Structure Matter?

Iman Sofian Suriawinata, Doddi Prastuti, Pristina Hermastuti

Abstract


Banks’ core deposits and net interest margins play important roles in the banks’ value creation process. This study examines the effects of bank size and ownership structure on banks’ core deposits and net interest margins. The mediating role of core deposits funding on the relationship among variables being studied is also explored. Applying a structural equation modeling approach on panel data consisting of 39 conventional banks listed on the Indonesian Stock Exchange during 2016-2020, this study documents several important findings. Firstly, core deposits fundings positively affect banks’ net interest margins. Secondly, bank size has a positive effect on banks’ core deposits fundings, and has a positive indirect as well as total effect on net interest margin. Thirdly, managerial and institutional ownerships have negative effects on core deposits, positive direct effects on bank net interest margin, but negative indirect effects on bank net interest margin. Lastly, the positive direct effects of managerial and institutional ownership on bank net interest margin are totally offset by the negative indirect effects brought on net interest margin (NIM) through core deposits.

 

DOI : 10.26905/jkdp.v27i3.9642


Keywords


Bank size, Core deposits; Mediation; Net interest margin; Owneship structure

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DOI: https://doi.org/10.26905/jkdp.v27i3.9642

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Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

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