Journal of Applied Finance & Banking

Utilizing Australian Shareholders' Association (ASA): Fifteen Top Financial Ratios to Evaluate Jordanian Banks' Performance

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  • Abstract

    The study aims at investigating the Australian Shareholders' Association (ASA) Fifteen Top financial ratios to measure the health of Jordan banks' performance, and also utilizing the implication of Casu & Girardone 2006 and Gutie'rrez de Roza 2007 model to estimates the banks' production function; interest rate revenue function thru analyzing 2015 and 2014data. The study approves the mismatch between banks' deposits and it credits, all banks operating in Jordan are likely to have a high spread (interest margin), Jordan banks experiencing a wide concentration, and banking sector exhibits a monopolistic competition market with high liquidity. Between comparator banks in Jordan, Islamic banks have less risks and more liquidity than Jordanian commercial banks, and Arab banks. However, Foreign banks are profitable and less risky among all banking industry. Finally, The study, through estimating interest rate revenue function, found that, the independent variables utilized (labor expenses, capital expense, funds interest expense, credit loans, deposits and equities) are proved to be significant, and explained 65.4% of the banks' interest rate revenue. The study recommends that Central Bank of Jordan has to develop its policies to be more active in regulating banking sector to co-opt with economic development needs, and ambitions. It has to work more on reducing banking concentration, stabilizing a moderate liquidity, and promote to achieve more efficient market.

    JEL classification numbers: G2
    Keywords: Interest spread, interest rate margin banking concentration, and banking performance, Geometric Mean or Average, JODIBOR and, Islamic Sharea'.