The Impact of Macroeconomic Variables and Banks Characteristics on Jordanian Islamic Banks Profitability: Empirical Evidence

Al-Qudah, Ali Mustafa; Jaradat, Mahmoud Ali

doi:10.5539/ibr.v6n10p153

Cited by 23 publications

(19 citation statements)

References 18 publications

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“…This finding is consistent with monetary theory, whereby as countries move from monetary targeting to inflation targeting, the interest channel of monetary policy becomes more effective relative to the other channels [6]. Our study results in this respect is inconsistent with the results of [51] who showed that in Jordanian Banks, the effect of growth of money supply on Return on Assets was positive and significant.…”

Section: Discussion Of Resultssupporting

confidence: 56%

“…Money Supply and bank profitability: A study by [51] on Jordanian Islamic Banks with Return on Assets (ROA) as measures of profitability found that growth in money supply had a positive effect on the profitability of banks. [52] conducted a study on the main determinants of performance for commercial banks in Japan covering the period of the global financial crisis and adopted Net interest income as a measure of performance.…”

Section: Review Of Empirical Literaturementioning

confidence: 99%

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Monetary Policy and Profitability of Commercial Banks in Uganda

Mbabazize¹,

Turyareeba²,

Ainomugisha³

et al. 2020

OJAppS

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Background: Economic theory suggests that monetary policy through interest rates affects bank profitability. There is limited empirical evidence on the relationship between monetary policy and profitability of commercial banks in Uganda. Objective: This study seeks to examine the effect of monetary policy on the profitability of commercial banks in Uganda. Methodology: The study adopts a causal relationship research design. Data, covering 9 years from 2010-2018, was collected from all the registered commercial banks which were in operation over the study period. Various monetary policy variables are included in the empirical model as predictor variables. Return on Assets is used as a measure of bank profitability. A dynamic two-step System Generalized Method of Moments panel estimator is applied to estimate the empirical model. Findings: Estimates show that monetary policy in terms of its link to the lending rate has a significant causal effect on Return on Assets, suggesting that interest rate changes predict bank profitability of commercial banks in Uganda. Further, results show that a rise in core inflation has a significant negative causal effect on the banks' profitability and that there is a significant lagged effect of Return on Assets. The 91-day treasury bill rate and money supply were insignificant in predicting bank profitability. Originality: Unlike previous related studies which have focused on major advanced economies and a limited number of studies which have considered only a few developing countries like Nigeria and Kenya, the current study provides empirical evidence on the link between monetary policy and commercial bank profitability in Uganda. Practical Implications: Policy makers in the financial sector may use the study results as a basis of implementation of appropriate monetary policy actions that enhance the profitability of Uganda's commercial banks. For instance, the central bank should promote low and stable

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Section: Discussion Of Resultssupporting

confidence: 56%

Section: Review Of Empirical Literaturementioning

confidence: 99%

Monetary Policy and Profitability of Commercial Banks in Uganda

Mbabazize¹,

Turyareeba²,

Ainomugisha³

et al. 2020

OJAppS

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“…(4), a wellcapitalized bank needs to borrow less to support a given level of assets. (5), PLS principle allows the Sharia bank to make additional financing with beneficial return which should imply higher profitability, [3,[36][37][38][39][40][41]. Capital is the most important factor for Sharia banking, strong capital shows the stability and resilience of banks in the face of risks and uncertainties in investment in the banking sector [42].The results of the study found that capital adequacy negatively affects the profitability, these findings indicate that the level of capitalization of banks is inadequate, Sharia banks have not maximized capital in their operationalization, most of the financing activities in Sharia Bank is not covered by capital, so that financing activities have high risk that affects profitability, thus Sharia banks need to maximize and improve capital, which means lowering capitalization leads to decrease in profitability.…”

Section: Discussionmentioning

confidence: 99%

The Determinants of Bank Profitability: Empirical evidence from Indonesian Sharia Banking Sector

Supiyadi¹,

Arief²,

Nugraha³

2019

Proceedings of the 1st International Conference on Economics, Business, Entrepreneurship, and Finance (ICEBEF 2018)

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This paper aims to examine the internal and external determinants of sharia banks profitability in Indonesia over the period 2010-2017. The bank profitability is measured by return on assets (ROA) as a function of bank-internal and external determinants. Using balances data set and fixed effect model, the empirical results have found strong evidence that both internal and external factors have a strong influence on the profitability. The internal factors of the bank i.e., capital adequacy, credit risk, and asset size have a significant and negatif effect on bank profitability, while liquidity have a positive and significant impact on banks profitability. However, the external factors only inflation has a significant and positive effect, while GDP has a negatif and significant effect on banks profitability. This result suggest that banks can improve their profitability through increasing banks liquidity, reinforce their capital structure, reduce their assets sizes and credit risk, in addition banks should be anticipate the external factors, thus sharia banks will be more competitive than conventional banks.

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“…It can be defined according to Guru et al, (2002) as an external source of business finance that a firm can use to improve its financial position and performance. For the Jordanian Islamic Banks, Qudah and Jaradat (2013) find that there is a negative and insignificant relationship between profitability and leverage. Izhar and Asutaya (2007) also established a negative and significant relationship between leverage and profitability in one Indonesian Islamic bank.…”

Section: Leveragementioning

confidence: 95%

The profitability of Islamic banking in Sudan

Elgadi

2018

IJMP

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We investigate the possible profitability determinants by employing the dataset comprised by 27 Sudanese banks from 2005 and 2013. Our contribution to the literature is that we examine the following three models of finance specific to Islamic banking performance: (a) Profit and Loss Sharing, (b) Non-profit and Loss Sharing and (c) Salam mode of finance. We find that ownership, capitalisation and asset utilisation have a positive impact on return on assets (ROA) while operation efficiency, bank age, leverage and specialisation bring an adverse impact. Our empirical evidence also indicates that the Profit and Loss Sharing mode of finance (PLS), one of the financial products provided by Islamic banking only, brings a positive impact on both financial performance indicators: return on assets (ROA) and return on equity (ROE).

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The Impact of Macroeconomic Variables and Banks Characteristics on Jordanian Islamic Banks Profitability: Empirical Evidence

Cited by 23 publications

References 18 publications

Monetary Policy and Profitability of Commercial Banks in Uganda

Monetary Policy and Profitability of Commercial Banks in Uganda

The Determinants of Bank Profitability: Empirical evidence from Indonesian Sharia Banking Sector

The profitability of Islamic banking in Sudan

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