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Impact of Internal Factors on Bank Profitability: Comparative Study between Saudi Arabia and Jordan

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  • Ahmad Aref Almazari

Abstract

This paper investigated the internal factors that affecting profitability of banks. The main objective was to compare the profitability of the Saudi and Jordanian banks by using the internal factors for estimations. The necessary data was collected from secondary sources. A sample of twenty three Saudi and Jordanian banks was considered with 161 observations for the period 2005-2011. Financial ratios were calculated and statistical tools including Pearson’s correlation, descriptive analysis of variance and regression analysis were utilized in testing the hypotheses and to measure the differences and similarities between the sample banks according to their different characteristics. The factors influencing the profitability were tested empirically. However, the results indicated that there is a significant positive correlation between ROA of Saudi banks with TEA, TIA and LQR variables, as well as a negative correlation with NCA, CDR, CIR and SZE variables. Meanwhile, there is a significant positive correlation between ROA of Jordanian banks with LQR, NCA, TEA and CDR variables, also there is a negative correlation of return on assets with CIR, TIA and SZE. It is recommended that empirical studies should be undertaken in the same field to find out what more internal factors could affect profitability of banks.

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  • Ahmad Aref Almazari, 2014. "Impact of Internal Factors on Bank Profitability: Comparative Study between Saudi Arabia and Jordan," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 4(1), pages 1-7.
    • Handle: RePEc:spt:apfiba:v:4:y:2014:i:1:f:4_1_7
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    Cited by:

    1. Zeyad Alkhazali & Ayman Abu-Rumman & Naser Khdour & Khaleel Al-Daoud, 2020. "Empowerment, HRM practices and organizational performance: a case study of Jordanian commercial banks," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(4), pages 2991-3000, June.
    2. Sapto Jumono & Noer Azam Achsani & Dedi Budiman Hakim & Muhammad Fidaus, 2016. "The Effect of Loan Market Concentration on Banking Rentability: A Study of Indonesian Commercial Banking, Dynamics Panel Data Regression Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 207-213.
    3. Md. Abu Issa Gazi & Md. Nahiduzzaman & Iman Harymawan & Abdullah Al Masud & Bablu Kumar Dhar, 2022. "Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks: Empirical Evidence from Bangladesh," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
    4. Achraf Haddad & Anis El Ammari & Abdelfettah Bouri, 2019. "Are the Islamic Banks Really more Profitable than the Conventional Banks in a Financial Stable Period?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(9), pages 994-1018, September.
    5. P. Thich D. & П. Тхих Д., 2017. "Детерминанты доходности банков: эмпирические данные из Вьетнама // Determinants of Banks’ Profitability: Empirical Evidence from Vietnam," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 5(4), pages 37-45.
    6. Sutrisno & Agus Widarjono, 2018. "Maqasid Sharia Index, Banking Risk and Performance Cases in Indonesian Islamic Banks," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(9), pages 1175-1184, September.
    7. Albert Antwi, 2021. "Analysis of Long-term Determinants of the Profitability for Amalgamated Bank of South Africa," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(3), pages 01-11, July.
    8. Lavinia Mihaela GUŢU, 2015. "Microeconomic Factors Affecting Banks’ Financial Performance: The Case Of Romania," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 7, pages 39-44, April.
    9. Ihsen Abid & Mohamed Goaied & Mouldi Ben Ammar, 2019. "Conventional and Islamic Banks’ Performance in the Gulf Cooperation Council Countries; Efficiency and Determinants," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(3), pages 623-665, September.
    10. Tri Wulandari & Lukytawati Anggraeni & Trias Andat, 2016. "Modeling the profitability of commercial banks in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 8(2), pages 109-119, April.
    11. Khawla K. Abdo, 2020. "The Impact of Internal Variables on the Islamic Banks and Conventional Banks Financial Performance in Jordan: A Comparative Study," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 222-231.
    12. Dayah Abdi Kulmie & Mohamed Abdirahman Abdulle & Mukhtar Sheikh Hussein & Hussein Abdi Mohamud, 2023. "Effects of Islamic Modes of Financing on Profitability of Banking Institutions," International Journal of Business and Management, Canadian Center of Science and Education, vol. 18(5), pages 237-237, October.
    13. Leonora Haliti Rudhani & Skender Ahmeti & Taulant Rudhani, 2016. "The Impact of Internal Factors on Bank Profitability in Kosovo," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(1), pages 95-107, February.
    14. Muhammad Mahmood Shah Khan & Farrukh Ijaz & Ejaz Aslam, 2014. "Determinants of Profitability of Islamic Banking Industry: An Evidence from Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 6(2), pages 27-46, October.
    15. Salma Zaiane & Fatma Ben Moussa, 2021. "What Drives Banking Profitability During Financial Crisis and Political Turmoil? Evidence from the MENA Region," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 13(3), pages 380-407, September.
    16. Nosheen & Abdul Rashid, 2021. "Financial soundness of single versus dual banking system: explaining the role of Islamic banks," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(1), pages 99-127, January.
    17. Mwinlaaru, Peter Yeltulme & Ofori, Isaac Kwesi & Adiyiah, Kwadwo Agyeman & Idun, Anthony Adu-Asare, 2016. "Non-Performing Loans and Universal Bank’s Profitability," MPRA Paper 82902, University Library of Munich, Germany.

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