Association between Interest Rate Changes and Profitability of Commercial Banks of Bangladesh

Samia Nur Jui, Rokibul Hasan Sakib and Md. Abu Rafsan
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Samia Nur Jui: Department of Accounting & information Systems, University of Dhaka, Dhaka-1000, Bangladesh
Rokibul Hasan Sakib: Department of Accounting & information Systems, University of Dhaka, Dhaka-1000, Bangladesh
Md. Abu Rafsan: Department of Accounting & information Systems, University of Dhaka, Dhaka-1000, Bangladesh

International Journal of Science and Business, 2020, vol. 4, issue 9, 17-37

Abstract: Commercial banks play a crucial role in the context of modern business world. Being financial intermediaries, banks effectively contributes to the economic growth of our country. The relationship between changing interest rates and its impact on bank’s profitability has become a sensitive fact of having paramount importance. A comprehensive study has been conducted by using 5 consecutive years’ data (2014-2018) of all the 30 listed commercial banks of Bangladesh. The secondary data was collected from annual reports of corresponding commercial banks. This study represents the association and effect of interest rate changes on bank’s profitability. It also shows empirical charts, graphs regarding analyzing data and communicating results. This report has been divided into seven chapters for the convenience of preparation. Descriptive analysis, linear regression analysis, multivariate analysis, analysis of variance, correlation analysis, multicollinearity test and durbin-watson test have been carried out to establish and explain the relationship between stated two facts. It is derived from the study that change in Interest rate has significant impact on the profitability of commercial banks. Interest rate spread positively impact the profitability measures of the study (ROE, ROA, and NIM).

Keywords: Interest rate change; Profitability; Bank rate; Commercial banks; Bangladesh. (search for similar items in EconPapers)
Date: 2020
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