The Impact of Internal and External Factors on Commercial Bank Profitability in Jordan

  •  Jamil Jaber    
  •  Abdullah Al-khawaldeh    


The primary focus of this paper is to address the determinants of profitability on commercial banks in Jordanand to examine to what extent the performance of commercial banks operating in Jordan are affected by internaland external factors of companies listed on the Amman Stock Exchange for Jordanian Banks between 2007 and2012. Previous studies focused only on internal factors, namely, the banks’ specific characteristics in Jordan.This study includes not only the internal factors, but also external factors, namely, macroeconomic and financialmarket structures. The question is whether there are significant impacts that can be gained from internal andexternal factors on ROAA. The internal factors of capital adequacy, liquidity ratio, and size are found to besignificant as well as all the external factors in these models. A third multivariate model which includes bothinternal and external factors is included in this study but not in previous studies. This model is found to besignificant.

As a result, this research gives deeper insights into determinants influencing the profitability of Jordaniancommercial banks within the Jordanian environment.

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