The impact of selected internal factors on the profitability of commercial banks in Jordan

Abstract

This paper analyzes the impact of internal factors on the profitability of commercial banks in Jordan in the period of 2009–2019. Bank size, capital adequacy, bank loans, bank and liquidity risk are taken as explanatory variables, with the rate of return on assets as a dependent variable. EViews software was used for regression analysis. This study highlights a significant and positive effect of f-statistics for SGBJ Bank, Kuwait Bank, Capital Bank, ABC Bank, and Arab Bank – 11.34, 5.46, 5.11, 5,14 and 5.62, respectively. This means that internal factors affect their profitability, there is a positive effect of internal factors on the profitability of SGBJ, Kuwait Bank, ABC Bank, and Arab Bank. SGBJ’s R-squared was 88%.This indicates that any change inthe bank’s profitability is 88% due to a change in internal factors, while R-squared of Kuwait Bank, Capital Bank, ABC Bank and Arab Bank was 78%, 77%, 77%, and 77%, respectively, indicating that changes in the banks’ profitability were caused by internal factors. This is due to the bank loan ratio, where SGBJ’s ratio 48.6 and the bank loan rate were 79% of total assets. Kuwait Bank 29.1, so bank loan rate is 56% of total assets, Cairo Bank 36.3, ABC Bank 11.8, and Capital Bank 16.37; f-statistics of Alethad Bank, Invest Bank, Arab Invest Bank, Housing Bank, Ahli Bank, Commercial Bank, Cairo Bank, and Jordan Bank were 0.75, 2.17, 1.61, 2.48, 2.26, 3.25, and 2.72, respectively. This indicates that internal factors do not affect the profitability of these banks.

Keywords

• commercial banks
• internal factors
• Jordan
• profitability