Exploring the effect of market risks on bank profitability: Evidence from Jordan-Reference-Cited by-同舟云学术

Exploring the effect of market risks on bank profitability: Evidence from Jordan

Published:2022-04-05 Issue:1 Volume:17 Page:186-195
ISSN:1816-7403
Container-title:Banks and Bank Systems
language:
Short-container-title:Banks and Bank Systems

Author:

Al-Rdaydeh Mahmoud¹^ORCID,Hamouri Basem²^ORCID,Aziz Abdul Rahman Abdul³,Meero Abdelrhman⁴^ORCID,I. Tabash Mosab⁵^ORCID

Affiliation:

1. Assistant Professor, Department of Banking and Finance, Jadara University

2. Associate Professor, Department of Finance, Business College, Al-Balqa Applied University in Sabbatical year at the Department of Finance, College of Business, Amman Arab University

3. Dr., Assistant Professor, College of Business Administration Kingdom University

4. Dr., Associate Professor, College of Business Administration Kingdom University

5. Ph.D., Associate Professor, Department of Business Administration, College of Business, Al Ain University

Abstract

This paper observes the dynamic impact of market risks on the profitability of banks listed on the Amman Stock Exchange (ASE) from 2010 to 2018 in Jordan. To identify the link, the relevant data were retrieved from the annual statements of Jordanian banks and one-step Generalized Method of Moments (GMM) approach was employed to diagnose the error regarding endogeneity. The results of the applied methodology showed that market risks impacted the profitability of Jordanian banks. Furthermore, the study also presented factors that affected the banks’ profitability, such as capitalization and bank size. The previous year profitability has a positive effect on the next year profitability. Moreover, stock market returns (SMRs) directly affect ROA and ROE because when SMRs enhances, bank profitability will increase. Bank managers should ponder the volatility of the market risk while enhancing the profitability of a bank. This relationship of the variables regarding Jordanian banks listed on the ASE was not considered before in the financial economics literature. Recommendations were also provided for Jordanian bank managers to mitigate market risks.

Publisher

LLC CPC Business Perspectives

Subject

Finance,Management of Technology and Innovation,Marketing,Organizational Behavior and Human Resource Management,Law

Link

https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16350/BBS_2022_01_Al-Rdaydeh.pdf

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