The relationship between return on investment and Jordanian banks value
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DOIhttp://dx.doi.org/10.21511/bbs.18(1).2023.12
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Article InfoVolume 18 2023, Issue #1, pp. 139-149
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Bank stakeholders such as investors, creditors, and other stakeholders of a bank, expect full disclosure to evaluate banks’ financial statements. To achieve this goal, bank managers can increase the value of a bank by enhancing the return on their investments. This study examines the impact of financial performance on the market value of Jordanian public shareholding banks. The study model examines the effect of return on investment (ROI), debt ratio, dividend policy, and current ratio while controlling for bank size. Bank value is measured using the market value. The sample is Jordanian banks listed on the Amman Stock Exchange between 2005 and 2020. To investigate the link between the study variables, the random effect model, panel least squares approach, correlation analysis, and descriptive measures are used. The findings indicate that banks own 3.025 JD from current assets for each JD from current liabilities. In addition, the debt ratio is 38.4% from total assets. Adj R2 for the study model is 22.1%. The results show that profitability, leverage, and bank size significantly affect the value of Jordanian banks, while dividend policy and liquidity do not have a significant impact.
- Keywords
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JEL Classification (Paper profile tab)G21, G32, M41
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References40
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Tables9
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Figures0
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- Table 1. Descriptive analysis
- Table 2. Pearson matrix
- Table 3. Spearman correlation matrix
- Table 4. The model
- Table 5. Large banks
- Table 6. Small banks
- Table 7. First model
- Table 8. Hausman test results
- Table 9. Random effect models – Model (1)
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