The Mediating Role of the Capital Structure, Growth Rate, and Dividend Policy in the Relationship Between Return on Equity and Market to Book Value

Abstract

This Study aims to study the indirect effect of profits measured by the return on stockholders' equity for the Jordanian Banks on market value measured by market value to book value for the period from 2008 to 2017. We have applied the indirect impact model to know the ability of capital structure, growth rate and dividend policy as mediating variables to transfer the impact of profits to market value. By using the simple linear analysis and applying indirect effect test model by using the Sobel equation the study reached out to a positive effect of profits on market value with the presence of debt ratio, growth rate and dividend policy as a mediating variables of that relation.

Earnings and market ratio: Additional evidence from Jordanian banks

“…Various theoretical perspectives have been proposed to investigate the link between profitability and the bank market. One widely accepted theory is the Structure-Conduct-Performance (SCP) framework (Altahtamouni et al, 2020). According to this theory, factors such as market concentration, barriers to entry, and competitive behavior can shape a bank's profitability in the market.…”