Determinants of banks’ profitability – the case of Jordan

Abstract

This paper seeks at investigating the critical determinants that affected the profitability of the commercial banks in Jordan by applying a balanced panel data set of these banks. So that it seeks to identify the significant bank-specific variables, by comprising 130 observations of thirteen banks over the years (2005-2014). A measurement of banks’ profitability is the return on assets (ROA) and the return on equity (ROE). The results indicate that the variables of capital adequacy, capital and leverage positively effect on the banks’ profitability, and the variable of assets quality negatively effects on the banks’ profitability. Results also indicate that rising bank’s profitability in Jordan is associated with well-capitalized banks, accompanied by high capital adequacy