Earnings and market ratio: Additional evidence from Jordanian banks

  • Received June 2, 2023;
    Accepted July 3, 2023;
    Published July 10, 2023
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/bbs.18(3).2023.02
  • Article Info
    Volume 18 2023, Issue #3, pp. 14-24
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This work is licensed under a Creative Commons Attribution 4.0 International License

The primary objective of this study is to investigate the correlation between profitability and the banks market value, while controlling for bank size as indicated by total assets. Two main models are analyzed, namely the benchmark model and the main model, to estimate the impact of high and low profitability on market value. The sample for this study consists of Jordanian banks covering the period from 2010 to 2020. The study results reveal that banks with high profitability exhibit a higher market value compared to those with low profitability, underscoring the crucial role of profitability as a determinant of bank value. Furthermore, the study establishes a link between low and high ROE and market value, indicating that variations in ROE significantly affect market value. Moreover, the study demonstrates a positive link between earnings and market value, emphasizing the significance of bank earnings in influencing market value. Lastly, the study emphasizes the role of bank size in shaping the link between ROE and market value, highlighting the importance of considering bank size when examining the link between profitability and market value.

Acknowledgment
I thank Amman Arab University for funding this research.

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    • Table 1. Descriptive statistics
    • Table 2. Correlation matrix
    • Table 3. Regression results
    • Table 4. Regression findings based on size
    • Table 5. Regression findings for the research models (MODEL 1)
    • Table 6. Regression findings for the research models (MODEL 2)
    • Table 7. Husman test
    • Table 8. Model (1), Random effect models
    • Table 9. Model (2)
    • Table 10. Panel Granger Causality
    • Conceptualization
      Mohammad Fawzi Shubita
    • Data curation
      Mohammad Fawzi Shubita
    • Formal Analysis
      Mohammad Fawzi Shubita
    • Funding acquisition
      Mohammad Fawzi Shubita
    • Investigation
      Mohammad Fawzi Shubita
    • Methodology
      Mohammad Fawzi Shubita
    • Resources
      Mohammad Fawzi Shubita
    • Writing – original draft
      Mohammad Fawzi Shubita
    • Writing – review & editing
      Mohammad Fawzi Shubita