Abstract

The aim of this study is to determine the effect of macroeconomic Variables (external variables) and bank
characteristic (internal variables) on the profitability of Jordanian Islamic banks for the period (2000–2011).the
study used panel data analysis fixed effects model and the generalized least square method to examine the study
hypotheses. The empirical analysis shows that capital adequacy, bank size have a positive and significant impact
on return on assets (ROA) and return on equity (ROE). While leverage measured by total deposit to total assets
has a negative and significant impact on (ROA) and (ROE). The liquidity has an inersary insignificant effect on
(ROA) and negative significant impact on (ROE). The study found that macroeconomic factors represented by
Amman stock exchange index, construction licensed square meters and money supply growth are good
determinants for Islamic banks profitability.

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