Determinants for the Performance of the Jordanian Banking Industry

Abstract

This study aims to evaluate the performance of banking industry in Jordan as well as to determine the most important factors influencing its performance. The study is applied on the Jordanian commercial banks listed in Amman Stock Exchange during the period 2000-2013, using panel data. The performance is measured using the return on equity (ROE) and the economic value added (EVA). Using the (ROE) index, the results show that concentration level and market share have no significant effect on the performance of banks. Also, using (EVA), the results indicate no significant effect for the level of concentration on the performance of banks. On the other hand, the results reveal that the performance of banks measured by economic value added responds positively to the growth in their market share. The macro-economic variables, such as GDP and money supply, were significant in explaining the performance of the Jordanian banking industry. Hence, good economic situation and optimistic conditions are expected to improve banks’ performance, while the capital ratio and leverage have a statistically significant inverse relationship with the performance.