In this paper, the determinants of commercial loan rates are analyzed using cross sectionevidence drawn from a survey of commercial bank lending. The objective is to obtain evidence in order to evaluate whether commercial loan rate behavior is consistent with the implications of three alternative theories of banking behavior and therefore provide evidence about the validity of these theories. In general, the cross section evidence leads to the conclusion that both imperfect competition and risk aversion in a portfolio context are important elements in understanding the pattern of commercial loan rates.
ASJC Scopus subject areas
- Economics and Econometrics