Research Article
BibTex RIS Cite
Year 2021, , 102 - 108, 30.06.2021
https://doi.org/10.17261/Pressacademia.2021.1395

Abstract

References

  • Al-Homaidi, E., Almaqtari, F., Yahya, A., Khaled, A. (2020). Internal and external determinants of listed commercial banks’ profitability in India: Dynamic GMM approach. International Journal of Monetary Economics and Finance, 13, 34-67.
  • Al-Homaidi, E., Tabash, M., Farhan, N., Almaqtari, F. (2018). Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach. Cogent Economics & Finance, 6, 1-26.
  • Allen, L. (1988). The determinants of bank interest margins: A note. Journal of Financial and Quantitative Analysis, 23, 231–235.
  • Almaqtari, F. A., Al‐Homaidi, E. A., Tabash, M. I., & Farhan, N. H. (2019). The determinants of profitability of Indian commercial banks: A panel data Approach. International Journal of Finance and Economics, 24, 168-185.
  • Angbazo, L. (1997). Commercial bank net interest margins, default risk, interest rate risk and off balance sheet banking. Journal of Banking and Finance, 21, 55–87.
  • Bagehot, W. (1873), Lombard Street, Homewood, IL: R. Irwin 1962 edition.
  • Batten, J. and Vo, X. (2019). Determinants of bank profitability - Evidence from Vietnam. Emerging Markets Finance and Trade, 55, 417-1428.
  • Caliskana, M. and Lecunab, H. (2020). The determinants of banking sector profitability in Turkey. Business and Economics Research Journal, 11, 161-167.
  • Chortareas, G. and Girardone, G. (2011). Banking sector performance in Latin America: Market power versus efficiency. Review of Development Economics, 15, 307-325.
  • Demirguc-Kunt, A. and Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability: Some international evidence. World Bank Economic Review, 13, 379-408.
  • Demirguc – Kunt, A. and Huizinga, H. (2001). Financial structure and bank profitability, in financial structure and economic growth: A cross-country comparison of banks, markets, and development. Cambridge and London: MIT Press.
  • Farooq, M., Khan, S., Siddiqui, A., Khan, M. and Khan, M. (2021). Determinants of profitability: A case of commercial banks in Pakistan. Humanities and Social Sciences Reviews, 9, 1-13.
  • Fungacova, Z. and Poghosyan, T. (2011). Determinants of bank interest margins in Russia: Does bank ownership matter? Economic Systems, 3, 481-495.
  • Gurbuz, A., Yanik, S. and Ayturk, Y. (2013). Income diversification and bank performance: Evidence from Turkish banking sector. Journal of BRSA Banking and Financial Markets, 7, 9-29.
  • Hashem, H. (2016). Determinants of Egyptian banking sector profitability: Time series analysis from 2004-2014. International Journal of Business and Economic Sciences Applied Research, 9, 73-78.
  • Helhel, Y. (2015). Evaluating the performance of the commercial banks In Georgia. Research Journal of Finance and Accounting, 5, 146- 156.
  • Ho, T., Saunders, A. (1981). The determinants of bank interest margins: Theory and empirical evidence. Journal of Financial Quantitative Analysis, 16, 581–600.
  • Jadah, H., M. Alghanimi, M., Al-Dahaan, N. and Al-Husainy, N. (2020). Internal and external determinants of Iraqi bank profitability. Banks and Bank Systems, 15, 79-93.
  • Le, T. and Ngo, T. (2020). The determinants of bank profitability: A cross-country analysis. Central Bank Review, 20, 65-73.
  • Le, T. and Nguyen, D. (2020). Capital structure and bank profitability in Vietnam: A quantile regression approach. Journal of Risk and Financial Management, 13, 168-172.
  • Levine, R. (2004). Finance and growth: Theory and evidence. NBER Working Paper No. 10766.
  • Lucas R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3- 42.
  • McShane, W. and Sharpe, G. (1985). A time series / cross section analysis of the determinants of Australian trading bank loan/deposit interest margins: 1962–1981. Journal of Banking and Finance, 9, 115–136.
  • Naceur, S. and Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks' performance. Emerging Markets Review, 12, 1-20.
  • Nassar, K., Martinez, E and Pineda, A. (2015). Determinants of banks’ net interest margins in Honduras. IMF Working Paper No. 14/163.
  • Omet, G. (2019). Income diversification and bank performance: The Jordanian case. Journal of Business, Economics and Finance, 8, 28-37.
  • Saif-Alyousfi, A. (2020). Determinants of bank profitability: Evidence from 47 Asian countries. Journal of Economic Studies, 47, 1-17.
  • Saunders, A. and Schumaker, L. (2000). The determinants of bank interest rate margins: An International Study. Journal of International Money and Finance, 19, 813-832.
  • Shami, M., Omet, G., Bino, A. and Abu-Khalaf, B. (2015). Banks offer lottery prices: What are the implications? Journal of Management, Marketing and Logistics, 2, 2015-2220.
  • Schumpeter, J. (1934). The theory of economic development, 1912, Translated by Redvers Opie. Harvard University Press, Cambridge, USA.
  • Topak, M. and Tırmandıoglu T. (2017). Bank specific and macroeconomic determinants of bank profitability: Evidence from Turkey. International Journal of Economics and Financial Issues, 7, 574-584.
  • Trujillo-Ponce, A. (2013). What determines the profitability of banks? Evidence from Spain. Accounting and Finance, 53, 561-586.
  • Yaseen, H., Omet, G. and Kahmash, F. (2015). On the entry of foreign banks: The Jordanian experience. International Journal of Economics and Finance, 7, 278-282

THE PERFORMANCE OF BANKS IN A DEVELOPING COUNTRY: HAS COVID-19 MADE ANY DIFFERENCE?

Year 2021, , 102 - 108, 30.06.2021
https://doi.org/10.17261/Pressacademia.2021.1395

Abstract

Purpose- The full implications of COVID-19 are yet to be seen. However, it has become clear that the virus has hit the supply and demand sides of economies, impacted banks and stocks markets, and led to significant decreases in the global flows of capital. Within this context, the purpose of this paper is to report on the performance of Jordanian banks in 2020, and examine the determinants of their performance.
Methodology- To realize the objectives of this paper, the performance of all listed Jordanian banks (13) during the period 2010-2020 is examined in terms of return on assets (ROA) and net interest margin (NIM). Using the Seemingly-Unrelated Regression (SUR), the dependent variables (ROA and NIM) are regressed on independent variables that include equity capital, bank expenses, size, income diversification, loan loss provisions, lending to the government, and economic growth.
Findings- The 2020 financial statements show that the profits of Jordanian banks (return on assets) have decreased from 1.43 percent in 2019 to 0.74 percent in 2020, or by about 48 percent. As far as the econometric results are concerned, it is interesting to note that while loan loss provisions impact bank profitability in a negative and significant manner, this “cost” is passed-on, at least partly, to bank customers in the form of wider costs of financial intermediation (NIM).
Conclusions- While the known determinants of bank performance are applicable to the Jordanian banks, it is encouraging to note that these banks have managed to finish their 2020 financial year in a good shape. Indeed, this is the result of their strong financial positions that enabled them to increase their loan loss provision by large proportions.

References

  • Al-Homaidi, E., Almaqtari, F., Yahya, A., Khaled, A. (2020). Internal and external determinants of listed commercial banks’ profitability in India: Dynamic GMM approach. International Journal of Monetary Economics and Finance, 13, 34-67.
  • Al-Homaidi, E., Tabash, M., Farhan, N., Almaqtari, F. (2018). Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach. Cogent Economics & Finance, 6, 1-26.
  • Allen, L. (1988). The determinants of bank interest margins: A note. Journal of Financial and Quantitative Analysis, 23, 231–235.
  • Almaqtari, F. A., Al‐Homaidi, E. A., Tabash, M. I., & Farhan, N. H. (2019). The determinants of profitability of Indian commercial banks: A panel data Approach. International Journal of Finance and Economics, 24, 168-185.
  • Angbazo, L. (1997). Commercial bank net interest margins, default risk, interest rate risk and off balance sheet banking. Journal of Banking and Finance, 21, 55–87.
  • Bagehot, W. (1873), Lombard Street, Homewood, IL: R. Irwin 1962 edition.
  • Batten, J. and Vo, X. (2019). Determinants of bank profitability - Evidence from Vietnam. Emerging Markets Finance and Trade, 55, 417-1428.
  • Caliskana, M. and Lecunab, H. (2020). The determinants of banking sector profitability in Turkey. Business and Economics Research Journal, 11, 161-167.
  • Chortareas, G. and Girardone, G. (2011). Banking sector performance in Latin America: Market power versus efficiency. Review of Development Economics, 15, 307-325.
  • Demirguc-Kunt, A. and Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability: Some international evidence. World Bank Economic Review, 13, 379-408.
  • Demirguc – Kunt, A. and Huizinga, H. (2001). Financial structure and bank profitability, in financial structure and economic growth: A cross-country comparison of banks, markets, and development. Cambridge and London: MIT Press.
  • Farooq, M., Khan, S., Siddiqui, A., Khan, M. and Khan, M. (2021). Determinants of profitability: A case of commercial banks in Pakistan. Humanities and Social Sciences Reviews, 9, 1-13.
  • Fungacova, Z. and Poghosyan, T. (2011). Determinants of bank interest margins in Russia: Does bank ownership matter? Economic Systems, 3, 481-495.
  • Gurbuz, A., Yanik, S. and Ayturk, Y. (2013). Income diversification and bank performance: Evidence from Turkish banking sector. Journal of BRSA Banking and Financial Markets, 7, 9-29.
  • Hashem, H. (2016). Determinants of Egyptian banking sector profitability: Time series analysis from 2004-2014. International Journal of Business and Economic Sciences Applied Research, 9, 73-78.
  • Helhel, Y. (2015). Evaluating the performance of the commercial banks In Georgia. Research Journal of Finance and Accounting, 5, 146- 156.
  • Ho, T., Saunders, A. (1981). The determinants of bank interest margins: Theory and empirical evidence. Journal of Financial Quantitative Analysis, 16, 581–600.
  • Jadah, H., M. Alghanimi, M., Al-Dahaan, N. and Al-Husainy, N. (2020). Internal and external determinants of Iraqi bank profitability. Banks and Bank Systems, 15, 79-93.
  • Le, T. and Ngo, T. (2020). The determinants of bank profitability: A cross-country analysis. Central Bank Review, 20, 65-73.
  • Le, T. and Nguyen, D. (2020). Capital structure and bank profitability in Vietnam: A quantile regression approach. Journal of Risk and Financial Management, 13, 168-172.
  • Levine, R. (2004). Finance and growth: Theory and evidence. NBER Working Paper No. 10766.
  • Lucas R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3- 42.
  • McShane, W. and Sharpe, G. (1985). A time series / cross section analysis of the determinants of Australian trading bank loan/deposit interest margins: 1962–1981. Journal of Banking and Finance, 9, 115–136.
  • Naceur, S. and Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks' performance. Emerging Markets Review, 12, 1-20.
  • Nassar, K., Martinez, E and Pineda, A. (2015). Determinants of banks’ net interest margins in Honduras. IMF Working Paper No. 14/163.
  • Omet, G. (2019). Income diversification and bank performance: The Jordanian case. Journal of Business, Economics and Finance, 8, 28-37.
  • Saif-Alyousfi, A. (2020). Determinants of bank profitability: Evidence from 47 Asian countries. Journal of Economic Studies, 47, 1-17.
  • Saunders, A. and Schumaker, L. (2000). The determinants of bank interest rate margins: An International Study. Journal of International Money and Finance, 19, 813-832.
  • Shami, M., Omet, G., Bino, A. and Abu-Khalaf, B. (2015). Banks offer lottery prices: What are the implications? Journal of Management, Marketing and Logistics, 2, 2015-2220.
  • Schumpeter, J. (1934). The theory of economic development, 1912, Translated by Redvers Opie. Harvard University Press, Cambridge, USA.
  • Topak, M. and Tırmandıoglu T. (2017). Bank specific and macroeconomic determinants of bank profitability: Evidence from Turkey. International Journal of Economics and Financial Issues, 7, 574-584.
  • Trujillo-Ponce, A. (2013). What determines the profitability of banks? Evidence from Spain. Accounting and Finance, 53, 561-586.
  • Yaseen, H., Omet, G. and Kahmash, F. (2015). On the entry of foreign banks: The Jordanian experience. International Journal of Economics and Finance, 7, 278-282
There are 33 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Muhanned Obeidat This is me 0000-0002-8988-1291

Ahmad Tarawneh This is me 0000-0002-5833-1887

Mohammad Khataibeh This is me 0000-0003-3599-903X

Ghassan Omet This is me

Publication Date June 30, 2021
Published in Issue Year 2021

Cite

APA Obeidat, M., Tarawneh, A., Khataibeh, M., Omet, G. (2021). THE PERFORMANCE OF BANKS IN A DEVELOPING COUNTRY: HAS COVID-19 MADE ANY DIFFERENCE?. Journal of Economics Finance and Accounting, 8(2), 102-108. https://doi.org/10.17261/Pressacademia.2021.1395

Journal of Economics, Finance and Accounting (JEFA) is a scientific, academic, double blind peer-reviewed, quarterly and open-access online journal. The journal publishes four issues a year. The issuing months are March, June, September and December. The publication languages of the Journal are English and Turkish. JEFA aims to provide a research source for all practitioners, policy makers, professionals and researchers working in the area of economics, finance, accounting and auditing. The editor in chief of JEFA invites all manuscripts that cover theoretical and/or applied researches on topics related to the interest areas of the Journal. JEFA publishes academic research studies only. JEFA charges no submission or publication fee.

Ethics Policy - JEFA applies the standards of Committee on Publication Ethics (COPE). JEFA is committed to the academic community ensuring ethics and quality of manuscripts in publications. Plagiarism is strictly forbidden and the manuscripts found to be plagiarized will not be accepted or if published will be removed from the publication. Authors must certify that their manuscripts are their original work. Plagiarism, duplicate, data fabrication and redundant publications are forbidden. The manuscripts are subject to plagiarism check by iThenticate or similar. All manuscript submissions must provide a similarity report (up to 15% excluding quotes, bibliography, abstract and method).

Open Access - All research articles published in PressAcademia Journals are fully open access; immediately freely available to read, download and share. Articles are published under the terms of a Creative Commons license which permits use, distribution and reproduction in any medium, provided the original work is properly cited. Open access is a property of individual works, not necessarily journals or publishers. Community standards, rather than copyright law, will continue to provide the mechanism for enforcement of proper attribution and responsible use of the published work, as they do now.