Determinants of interest rate spreads of conventional banks listed on the Indonesia Stock Exchange

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The purpose of this study is to examine the variables that determine the interest rate spreads (IRS) of conventional banks listed on the Indonesia Stock Exchange (IDX). There are four major variables that affect a bank’s interest rate spreads, namely financial bank, macroeconomics, economic freedom and market structure variables. The study participants are conventional banks listed on the Indonesia Stock Exchange from 2013 to 2017. Data was tested by using the OLS regression model. The results of this study show that all of the financial bank variables (Liquidity Risk (LR), Return to Asset Ratio (RTAR), Capital Adequacy (CA), Cost Efficiency Ratio (CER), and Risk Aversion (RA)) can significantly affect interest rate spreads. While of the macroeconomic variables, only two can significantly affect interest rate spreads, namely Gross Domestic Product (GDP) and Inflation Rate (IR). Furthermore, all of the variables of economic freedom and market structure can significantly determine interest rate spreads.

Acknowledgment
The authors thank the Research Cluster of Governance and Competitiveness, Faculty of Administrative Sciences, Universitas Indonesia, for providing financial assistance and supporting materials related to discussion, and assistance in writing this paper.

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    • Figure 1. Economic Freedom Index 2013–2017
    • Table 1. Descriptive analysis
    • Table 2. The impact of each independent financial bank variable on IRS
    • Table 3. The impact of each independent macroeconomic variable on IRS
    • Table 4. The impact of each independent economic freedom variable on IRS
    • Table 5. The impact of each independent market structure variable on IRS
    • Conceptualization
      Chandra Wijaya, Yunika Lucianna
    • Formal Analysis
      Chandra Wijaya, Yunika Lucianna, Fibria Indriati
    • Funding acquisition
      Chandra Wijaya, Yunika Lucianna, Fibria Indriati
    • Investigation
      Chandra Wijaya, Yunika Lucianna
    • Methodology
      Chandra Wijaya, Yunika Lucianna
    • Resources
      Chandra Wijaya, Yunika Lucianna
    • Supervision
      Chandra Wijaya
    • Validation
      Chandra Wijaya, Yunika Lucianna, Fibria Indriati
    • Writing – review & editing
      Chandra Wijaya, Fibria Indriati
    • Data curation
      Yunika Lucianna
    • Writing – original draft
      Yunika Lucianna
    • Project administration
      Fibria Indriati