Journal Screenshot

International Journal of Academic Research in Accounting, Finance and Management Sciences

Open Access Journal

ISSN: 2225-8329

Impact of Financial Leverage and Return on Investment on the Profitability of Jordanian Commercial Banks

Amjad Ghazi AL-Habashneh

http://dx.doi.org/10.6007/IJARAFMS/v12-i3/15320

Open access

This Study aimed to analyzes the impact of Financial Leverage and Return on Investment on Profitability of Jordanian Commercial Banks during the Period (1995-2020), the rate of return on assets was used to measure the profitability of banks. The study sample consisted of (13) Jordanian commercial banks listed on the Amman Stock Exchange. This Study used random effect model. The results show a negative impact of the ratio of financial leverage on the profitability of Jordanian commercial banks as the higher the ratio of financial leverage, the lower the profitability of the banks. And no impact of return on investment on the profitability of Jordanian commercial banks. This study recommended the necessity of directing Jordanian commercial banks to financing by increasing capital and using retained earnings, and not to rely on debt financing (financial leverage) because of the negative effect of financial leverage on profitability.

Al-Moued, F. A. (2019). The effect of financial leverage on the profitability of banks listed in the Damascus Securities Exchange. Al-Baath University Journal, 41(64): 57–87
Al-Sayegh, N. T. (2018). Bank Credit. Beirut - Lebanon: Dar Al-Kotob Al-Elmeyyah for Publishing and Distribution.
Al-Serafy, M. (2014). Financial analysis: an accounting managerial view. Cairo - Egypt: Dar Al-Fajr for Publishing and Distribution.
Al-Shammari, S. (2018). Management of banking operations, entrances and applications. Amman - Jordan: Dar Al-Yazuri for Publishing and Distribution.
Al-Taraban, M. A., and Al-Sadiq, M. B. (2019). The effect of financial leverage on the performance of Libyan commercial banks (an applied study on Al Wahda Bank). Economic Afaq, 5(10): 84–114.
Berghoff, C. (2017). Using DuPont Analysis to Predict Changes in Profitability: Evidence from Europe. (1ed). Switzerland: Universität St. Gallen.
Blokdyk, G. (2018). ROE Return on Equity Complete Self-Assessment Guide. Emereo Pty Limited.
Chang, K.(2021). The impact of capital leverage on green firms’ investment: New evidence regarding the size and age effects of Chinese green industries. Finance Research Letters, 38(July 2019): 101529. https://doi.org/10.1016/j.frl.2020.101529.
Dudin, A. Y. (2020). Modern business administration (organizational functions). Amman - Jordan: Dar Al-Yazuri Scientific Publishing and Distribution.
Ekonomi, F. (2021). Analyzing The Effect Of Bank Characteristic On Profitability In Banking Companies Listed In Indonesia Stock Exchange. Journal Ekonomi Universitas Kadiri, 6(1): 100–120.
Glowrey, M. (2013). The Sterling Bonds and Fixed Income Handbook: A practical guide for investors and advisers. (1ST ed.) United Kingdom: Harriman House Limited.
Jackson, D. (2018). Profitability, Mechanization and Economies of Scale. (3rd ed.) United States: Routledge Taylor and Francis Group.
Kalash, I. (2019). The effect of the capital structure on the performance of Islamic and conventional banks in Turkey: A comparative study. Tigris University, Institute of Social Sciences, 5(1): 115–32
Kanaan, A., and Ali, S. (2018). The effect of financial leverage on profitability, an applied study on non-financial companies listed on the Damascus Stock Exchange. Tishreen University Journal of Economic and Legal Sciences, 40(3): 265–80
Laffy, D., and Walters, D. (2016). Managing Retail Productivity and Profitability. United Kingdom: Macmillan Business.
Lockhart, B. (2014). Credit lines and leverage adjustments. Journal of Corporate Finance, 25: 274–88.
Muhammad, A. I. A. (2014). The effect of using debt in financing on profitability, an applied study on banks listed in the Saudi stock market (Tadawul) 2006-2012. The Scientific Journal of the Faculties of Commerce Sector, Al-Azhar University, (12): 438–83.
Muhammad, M., and Hamad, A. Al-H. R. (2012). Bank Governance. Amman - Jordan: Dar Al-Yazuri Scientific Publishing and Distribution
Nelaeva, Galina, and Semenov, A. (2016). EU-Russia Rivalry in the Balkans: Linkage, Leverage and Competition (The Case of Serbia). Romanian Journal Of European Affairs, 16(3): 56–71.
Niresh, J. A. (2012). Capital Structure and Profitability in Srilankan Banks. Global Journal of Management and Business Research, 12(13): 66–74.
Onyenwe, N. I., and Glory, I. (2017). Effect Of Financial Leverage On Firm’s Performance: A Study Of Nigerian Banks (2006 -2015). International Journal of Recent Scientific Research, 8(7): 18554–64.
Otterburn, A. (2016). Profitability and Law Firm Management. (3rd ed.) Ireland: The Law Society.
Rahim, A. (2021). The Impact Of Financial Leverage On Roe For Islamic Banks In Asian Region?: The Study Based On Signaling Theory. Journal of Contemporary Issues in Business and Government, 27(1): 658–85.
Ramlall, I. (2019). The Corporate, Real Estate, Household, Government and Non-Bank Financial Sectors Under Financial Stability. (1st ed.) United Kingdom: Emerald Group Publishing.
Rao, P. M. (2011). Financial Statement Analysis and Reporting. (1st ed.) India: PHI Learning Private Limited.
Shaheen, M. (2017). Analysis and evaluation of stock portfolios. Egypt: Hamithra House for Publishing and Distribution.
Shamaileh, M. O., and Salim, M. K. (2014). The Effect of the Financial Leverage on the Profitability in the Tourism Companies (Analytical Study- Tourism Sector- Jordan). Business and Economic Research, 4(2): 251–64.
Singhvi, N. M., and Ruzbeh, J. B. (2018). management accounting, third edition: text and cases. (3rd ed.) Delhi: PHI Learning Private Limited.
Tulsian, P. C., Tulsian, B., and Tulsian, T. (2020). Tulsian’s Financial Management For CA Intermediate. (1st ed.) India: McGraw-Hill Education.
Weygandt, J. J., Paul, D. K., and Donald, E. K. (2017). Managerial Accounting: Tools for Business Decision Making. (8th ed.) United States: John Wiley & Sons Inc.

In-Text Citation: (AL-Habashneh, 2022)
To Cite this Article: AL-Habashneh, A. G. (2022). Impact of Financial Leverage and Return on Investment on the Profitability of Jordanian Commercial Banks. International Journal of Academic Research in Accounting Finance and Management Sciences, 12(3), 804–822.