The effects of the entry of big banks on the profitability of rural banks in selected municipalities in Cavite

• Main Authors: Cordero, Rosary Anne D., Esguerra, Margarita Victoria U., Resultay, Ma. Adrienne Kristelle D., Santiago, Andrea C.
• Format: text
• Language: English
• Published: Animo Repository 2017
• Subjects: Universal banks > Philippines; Banks and banking > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/8573
• Institution: De La Salle University

This paper examines the effects of having big banks, or universal-commercial banks, to the profitability of rural banks in selected municipalities of Cavite. Using the annual income statements of 8 rural banks in Cavite from the years 2000-2016, the study utilized the Probit model to determine the probability of a big bank to enter the market in Cavite, and likewise to validate the attractiveness of vicinity to other big banks, at the same time the ordinary least square model was also used to see the effects of the independent variables (big banks, population logarithm, population growth and number of rural and commercial and universal banks) to the dependent variables (market return on assets and net income). The result of the study concluded that the presence of big banks in a specific vicinity generates no significant effect to the profitability (net profit and ROA in particular) of the rural banks already operating in that area. For a rural bank to have low profitability, however, may be caused by other reasons such as banking regulations imposed by the central banks, costumer loyalty, and behavioral and cultural aspects of the people in the area.