Factors Affecting Profitability of the Jordanian Banking Sector

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 2059-2066

10 Pages Posted: 16 Feb 2019 Last revised: 20 Feb 2019

See all articles by Omar Gharaibeh

Omar Gharaibeh

AL albayt University

Bassam Alown

AL albayt University

Ghaith N. Al-Eitan

AL albayt University

Date Written: November 27, 2017

Abstract

This paper attempts to identify determinants of the profitability of the banking sector in Jordan. To achieve this purpose, yearly data over the period 1993-2014 and Ordinary Least Square (OLS) method are used to investigate the impact of capital, size, tangible assets, and economic growth on the profitability of the Jordanian banking sector represented by return on asset (ROA). While the profitability of Jordanian commercial banks or Jordanian Islamic banks has been examined by previous research, this study is the first to address the determinants of the profitability of the banking sector in Jordan. This paper has shown strong evidence that internal characteristics and external factor have a strong influence on the profitability. The first internal variable represented by capital and external factor represented by real GDP are positively and statistically significant effect on the Jordanian banking sector profitability, while internal variable represented by size affects negatively and statistically significant on the profitability of the Jordanian banking sector. Finally, ROA is economically and negatively affected by tangible assets. These results are useful to both academics and policy makers.

Keywords: Banking Sector; Profitability; Return on Assets; Correlation; OLS

JEL Classification: E44; G10.

Suggested Citation

Gharaibeh, Omar and Alown, Bassam and Al-Eitan, Ghaith N., Factors Affecting Profitability of the Jordanian Banking Sector (November 27, 2017). International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 2059-2066, Available at SSRN: https://ssrn.com/abstract=3323893

Omar Gharaibeh (Contact Author)

AL albayt University ( email )

Mafraq, Middle 00962
Jordan
0772661030 (Phone)

Bassam Alown

AL albayt University ( email )

AL-Hashemia
Ajloun, 00962
Jordan

Ghaith N. Al-Eitan

AL albayt University ( email )

AL-Hashemia
Ajloun, 00962
Jordan

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