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Determinants of Financial Performance of Commercial Banks in Jordan: Application of CAMELS Model

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  • Saleh Jawarneh

    (UNIVERSITY OF MISKOLC)

Abstract

This study aims to evaluate and analyse the financial performance of the banks listed on the Amman Stock Exchange (ASE) for the period 2016-2020. The study covers 13 commercial banks and excludes the three Islamic banks from the listed banks on the ASE. The study also examines the relationship between CAMELS model components and banks profitability represented by Return on Assets (ROA) and Return on Equity (ROE). All data are collected from the financial statements of the Jordanian commercial banks, the Central Bank of Jordan, previous studies, and the Amman Stock Exchange. Sufficient and adequate analysis is used to analyse the data in this research – Regression Analysis, Coefficient Correlation, and Cluster Analysis using SPSS. The findings show that the Capital Adequacy Ratio, Earning Ability, and Liquidity have a positive but non-statistically significant influence on the financial performance of the Jordanian Commercial banks, as measured by the ratio of ROA and the ratio of ROE. The results also demonstrate that the Asset Quality, Management Efficiency, and Sensitivity to Market Risks all have a negative and non-statistically significant impact on Jordanian Commercial banks financial performance as evaluated by the ROA and the ROE ratios.

Suggested Citation

  • Saleh Jawarneh, 2022. "Determinants of Financial Performance of Commercial Banks in Jordan: Application of CAMELS Model," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 18(01), pages 75-82.
    • Handle: RePEc:mic:tmpjrn:v:18:y:2022:i:01:p:75-82
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    File URL: http://tmp.gtk.uni-miskolc.hu/volumes/2022/01/TMP_2022_01_6_k.pdf
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    References listed on IDEAS

    as
    1. Elizabeth M. Samuel, 2018. "Comparative Performance Evaluation of Selected Commercial Banks in India using CAMELS Rating Model," International Journal of Global Sustainability, Macrothink Institute, vol. 2(1), pages 24-38, December.
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    More about this item

    Keywords

    Financial Performance; CAMELS Model; commercial banks; Ranking; Jordanian Banks; Regression; Cluster;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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