The Impact of Interest Rate Liberalization Announcement in China on the Market Value of Hong Kong Listed Chinese Commercial Banks

摘要

This paper examines the impact of the announcement of interest rate liberalization by the People’s Bank of China on the market value of Hong Kong listed Chinese commercial banks by using the econometrics of event study. We find that their stock prices fall significantly in response to the announcement of interest rate liberalization. This finding supports our belief that interest rate liberalization narrows the net interest margin and profitability of the banking system.