Amman Stock Exchange Research Articles

Institutional investors’ impact on sustainability disclosure: exploring the moderating role of financial performance

Purpose This paper aims to investigate the relationship between institutional investors and sustainability disclosure, specifically examining the impact of financial performance as a moderator variable on the relationship between institutional investors and sustainability disclosure. Design/methodology/approach This paper used a panel data set of 51 firms from the industrial sector listed in the Amman Stock Exchange, with a total of 459 observations during 2013–2021. Multiple regression models were used to test the direct and moderating relationships. Findings The findings of this paper indicate that institutional investors exhibit varying attitudes toward sustainability disclosure. Institutional investors have a positive and significant impact on firm sustainability disclosure. Furthermore, the relationship between institutional investors and sustainability disclosure is significantly influenced by financial performance. Social implications The study’s findings encourage regulators to enhance firms’ awareness of sustainability disclosures by balancing the economic, social and environmental pillars. This can be achieved by conserving natural resources, protecting the environment and promoting social justice for future generations. Originality/value The paper’s insights can be valuable for policymakers’ sustainable practices by encouraging institutional investors to support sustainability activities actively.

The relationship between innovation capability and profitability: The mediating role of enterprise risk management in Amman Stock Exchange (ASE)

In the face of growing competition, industrial and commercial firms need more effective strategies to gain competitive advantages. This study investigates the role of enterprise risk management (ERM) as a mediator in highlighting the significance of innovation capability on profitability in industrial and commercial firms listed on the Amman Stock Exchange (ASE). Data were collected from 244 respondents using a standardized questionnaire and analyzed with SPSS software. The results indicate that the innovation capability has an impact on profitability in industrial and commercial firms, as well as their ERM practices. Additionally, ERM mediates the relationship between innovation capability and profitability. Firms that adopt distinctive innovation strategies tend to maintain formal ERM strategies, which in turn enhance market superiority and profitability. This research offers some significant managerial ramifications that may be essential for business owners, executives, and decision-makers involved in the development of firms.

Technical Analysis of the Indonesian Stock Market with Gated Recurrent Unit and Temporal Convolutional Network

Big data is essential in the age of 4.0 industry as it becomes the basis of decision making. Deep learning research in the last few years has been proven effective in understanding complex big data patterns, especially in the finance sector. The rapid growth of the Indonesian stock market in the last 20 years, which was driven by globalization, prompted fluctuation in the Bursa Efek Jakarta (JKSE) which was influenced by stock prices, commodity prices, and exchange rate. This study identifies the main indicators of Indonesian stock market crisis, applies and compares deep learning models, particularly Gated Recurrent Unit (GRU) and Temporal Convolutional Network (TCN), in predicting stock prices. This study identified 20 JKSE crisis points between the 2002-2023 period with average return value at around -6%. All variables correlated positively with JKSE, with SET.BK as the highest correlated variable in lag 0. The American and European stock market, commodity price, and exchange rate tend to show a pattern opposite to the JKSE crisis. Predictor variables such as STI, HIS, KLSE, KS11, SET.BK, PSEI.PS, RUT, and USDIDR are chosen based on significant cross correlation and average return plot. Hyperparameter tuning and cross validation within a 3 years window concluded that the GRU model is accurate and efficient, with RMSE value at 43.35568 and MAE value at 33.66909 in the validation data.

The Expected Impact of Applying the Insurance Contracts Standard (IFRS 17) in the Solvency and Profitability of Insurance Companies listed on the Amman Stock Exchange

This study aimed to identify the expected impact of applying International Financial Reporting Standard No. 17 on the solvency and profitability of the insurance companies listed on the Amman Stock Exchange. The descriptive analytical approach was used to achieve the study's aim. The study used the questionnaire as a tool, where the study population consisted of all insurance companies listed on the Amman Stock Exchange. In contrast, the study sample included heads of accounts departments and actuaries working in insurance companies and accountants, and 33 questionnaires were distributed to insurance companies. One of the most important findings of this study was that there is a relationship between the independent variable (application of IFRS No. 17) and the dependent variable (solvency) in the insurance companies listed on the Amman Stock Exchange. And that there is a relationship between the independent variable (application of International Financial Reporting Standard No. 17) and the dependent variable (profitability) in the financial and service insurance companies listed on the Amman Stock Exchange. One of the most important recommendations of the study is the need for insurance companies to be keen to provide employees with ongoing experimental courses to remove the ambiguity surrounding some of the provisions of International Financial Reporting Standard No. 17.

Human capital efficiency, corporate sustainability, and performance: Evidence from emerging economies

AbstractThis study examines how corporate sustainability (CS) influences the relationship between human capital (HC) effectiveness and corporate performance (CP) in the context of emerging economies. Drawing on HC theories and CS, we employ partial least squares structural equation modeling (PLS‐SEM) to analyze data from 94 industrial and service firms listed on the Amman Stock Exchange (ASE) between June and October 2022. Our findings reveal the dual role of HC, which not only directly influences CP but also significantly reinforces CS efforts. This research contributes to strategic management literature by highlighting the mediating role of CS in the HC‐performance nexus. The results underscore the strategic value of HC in enhancing sustainable practices, which positively affect CP. These insights are particularly relevant for emerging economies, where understanding the role of HC can guide corporate strategies toward sustainable growth. Theoretical and practical implications are discussed, with a focus on the importance of HC development to promote resilience and support sustainability goals in emerging markets. Future research could explore these dynamics across other industries and regions.

Does the adoption of extensible business reporting language impact the quality of financial reporting? The mediating role of the e-disclosure system

The study aimed to demonstrate the mediating role of the e-disclosure system (E-DS) in the relationship between the extensible business reporting language (XBRL) and the quality of financial reporting (FRQ), for the Jordanian companies listed at the Amman Stock Exchange (ASE). This study uses AMOS to perform structural equation modelling to analyze the data; survey data was gathered from 284 respondents working across various industries and sectors listed at the ASE; 229 usable responses were received. This study finds that XBRL is positively associated with the FRQ. Further, it is found that E-DS positively influences FRQ and plays a mediating role in the connection between XBRL and FRQ. The results of this study are expected to be of high quality regarding the preparation and presentation of financial statements by XBRL. Also, the study’s findings make original contributions to developing countries other than Jordan, which are expected to benefit.

The effect of board of directors’ characteristics on disclosing tone in the annual reports: evidence from Amman stock exchange

PurposeThis study examines the impact of board characteristics (i.e., board independence, board size, number of board meetings, foreign directors, and representation of females on the board of directors) on the tone disclosed in the banks’ annual reports of the Jordanian banking industry.Design/methodology/approachThe sample of this study contains all banks in the Jordanian banking industry for the period 2010–2019. This study employs a quantitative research method to examine the impact of the board of directors' characteristics on the tone of disclosure. Although disclosure tone is qualitative information, it has been converted into numbers (the frequency of positive and negative words) using the NVivo program. The "tone" is measured in this study based on lists of positive and negative words developed by Loughran and McDonald’s list. Then, a pooled regression analysis is used to investigate whether the board of directors' characteristics affect the disclosure tone.FindingsThe study results show that corporate governance plays a significant role in disclosing tone in banks’ annual reports. Clearly, the results show that the number of board meetings positively impacts the emergence of tone disclosure. In addition, the presence of women on the board of directors positively impacts the tone disclosure. In contrast, the foreign directors’ existence on the board of directors has a negative effect on the tone disclosure. However, the results show no relationship between board independence, size, and tone disclosure.Originality/valueThis study contributes by providing knowledge and insights into tone disclosure in an emerging market. Based on signaling theory, tone disclosures are the mangers’ signals given to the stakeholders in their firms’ financial reports. Managers disclosing positive tones to convey good news to their stockholders, and this considered as one of the main targets for these managers. This study provides insights into the relatively under-researched area of disclosure tone in an emerging market. It sheds light critically on how board of directors’ characteristics within the banking industry in Jordan contributes to their disclosure tone in the annual reports. This contribution helps stakeholders including policymakers, CEOs, and capital market participants understand how board members’ characteristics can contribute in building a straightforward disclosure tone in their financial reports. The study's conclusions are particularly significant because they attest to the need for financial knowledge and diversity of gender. The tone disclosure presented in financial reports, along with its anticipated impact on future investor decisions, is a crucial aspect for stakeholders to comprehend.Practical implicationsOur findings suggest that banks in Jordan should carefully consider the characteristics of their boards of directors, as these are crucial to ensuring transparency in disclosures. Additionally, maintaining a consistent and clear tone in annual reports is vital, as it significantly influences investor confidence and interest. This transparency can be strengthened by the quality and effectiveness of the bank's directors.Recommendations/future researchFor future research, the current study results can be reinvestigated to other emerging countries, other sectors, other measures for the disclosure tone and the board of directors’ characteristics, and more important different periods to include the effects of COVID-19 pandemic and financial crisis.

The Impact of Audit Quality on the Financial Performance of The Listed Jordanian Chemical Company Sector

The study aims to find out the impact of audit quality on the financial performance of the chemical company sector, to explore how audit quality, especially focus on auditor independence and the size of the audit committee, affects the financial performance (ROA, ROE, EPS) of the Jordanian chemical industries sector listed on the Amman Stock Exchange. In order to examine the data a questionnaire was distributed to study sample consists of (59) employees working within chemical companies, (48) from it valid for statistical analysis where the number of chemical companies reached (8). Ordinary Simple Linear regression method employed in the analysis of data. The study revealed that auditor’s independence has a positive and significant effect on financial performance of Chemical Company Sector. It was concluded that aspect of audit quality influence financial performance of Chemical Company. The study recommended Auditor’s independence should be increased greatly in order to enhance financial performance (ROA, ROE, EPS) of the Chemical Company Sector, by improving internal control of the company, also, Always Conduct integrity and appropriate usage tests for auditors. Shareholder should control the committee size, by controlling the audit committee members, which will reflect positively on the audit report quality.

Exploring aggressive tax planning dynamics: the impact of investment opportunity sets and free cash-flow surplus

PurposeThis study aims to investigate how investment opportunity sets (IOs) and free cash-flow (FCF) surpluses affect aggressive tax planning (ATP). This research focuses on examining the correlation between these factors and delves into how ATP, perceived as a tool for exploiting legal loopholes, plays a central role.Design/methodology/approachThis study uses panel data analysis techniques on a sample of 1,248 firm-observations gathered from nonfinancial enterprises in Jordan that are listed in the Amman Stock Exchange (ASE) between the years 2008 and 2019. The Driscoll–Kraay regression model (fixed effect) is enlisted to avoid the inconsistency of the slope across individual units and time period.FindingsThe findings indicate that the IOs does not affect ATP. However, there is a significant negative effect of FCF surplus on ATP. Furthermore, consistent with positive accounting theory the data reveal that all of these control variables exert a substantial positive influence on ATP.Research limitations/implicationsThis study concentrates on nonfinancial firms listed in the ASE, thereby constraining the applicability of the results to alternative contexts. Nevertheless, the findings of this study enhance comprehension regarding the extent of ATP and bear policy implications for policymakers regarding the structuring of future tax systems aimed at reducing the prevalence of tax avoidance behaviors. Thus, future research should conduct longitudinal studies to capture temporal dynamics.Originality/valueThis study contributes to the existing literature on ATP by focusing on using the Wilson tax-shelter model as a precise proxy. It fills gaps in prior research by exploring connections between IOs, FCF and ATP. The findings offer novel insights into the dynamics of tax planning strategies and contribute to the broader understanding of tax management practices.

Capital structure: Its effects on earnings volatility, cash flows, and financial performance in commercial banks

This study aimed to clarify the effect of capital structure on earnings volatility and cash flows in the commercial banking sector. The research focused on all 15 banks listed on the Amman Stock Exchange, and data were gathered from their financial statements between 2018 and 2022. The study employed multiple regression analysis to assess the data and test hypotheses. Previous studies have shown mixed results, with some finding a positive relationship between capital structure and financial performance, while others presented opposing views. The findings of this study provide statistical evidence that the debt-to-asset ratio (DTA) positively influenced operating cash flows and their volatility, while negatively affecting profits and their volatility. Additionally, the debt-to-equity ratio (DETE) positively impacted operating cash flows, their volatility, and profit volatility. These results suggest that banks should aim for a balanced capital structure to maintain stable profits and cash flows over time. This requires careful consideration of risks, regulatory requirements, market conditions, and the cost of capital. A balanced approach, involving both debt and equity financing, helps banks manage the risks of fluctuating cash flows and profits.

Relationship between corporate governance and audit quality in the industry sector: Moderating role of firm performance

This study explores the relevance of corporate governance mechanisms in determining audit quality, with a specific focus on the moderating role of firm performance in the Jordanian industrial sector. Audit quality is essential for ensuring transparency and accountability in financial reporting, making this analysis highly relevant for stakeholders aiming to strengthen corporate governance. The study sample included 64 manufacturing companies listed on the Amman Stock Exchange for the study period (2014–2022), with a total of 474 firm-year observations. The regression analysis is used to investigate the study hypotheses, including the key variables related to corporate governance, board performance, and audit quality. The findings show that company size has a significant positive effect on audit quality. There is no significant impact of CEO duality, independent directors, and ownership concentration on audit quality within the Jordanian industrial sector. The R² value of 0.067 indicates that approximately 6.7% of the variance in audit quality is explained by the study variables, while the F-value of 6.633, with a significance level of 0.00, suggests that the overall model is statistically significant, even though the explanatory power is relatively low. The study shows that company size is important to improve audit quality; other governance mechanisms may not have the same impact in the Jordanian industrial sector.

The value relevance of accounting information on amman stock exchange: the moderating role of audit quality

The value relevance of accounting information on amman stock exchange: the moderating role of audit quality

Nexus between corporate governance and FinTech disclosure: a comparative study between conventional and Islamic banks

Purpose This study investigates the impact of corporate governance on FinTech disclosure levels in Jordanian conventional and Islamic banks. It aims to determine whether governance mechanisms affect disclosure practices in the FinTech sector, exploring the interplay between governance and transparency in financial innovations. Design/methodology/approach The research methodology entails a thorough analysis of data from all 15 Jordanian conventional and Islamic banks listed on the Amman Stock Exchange, covering the period from 2015 to 2022. This study uses manual content analysis using a custom FinTech Disclosure Index (FDI) and quantitative analysis with a two-way clustered error regression model. Findings The findings show that corporate governance mechanisms, particularly board size, board meetings and “Big4” audit firms, are crucial in enhancing FinTech disclosure across conventional and Islamic banks. However, Islamic banks consistently show higher disclosure levels than their conventional counterparts, attributed to their distinct governance structures that emphasize ethical governance and transparency. These results indicate an awareness among decision-makers about the importance of business model transformation toward FinTech. Originality/value This study pioneers the introduction of FDI, using it for a novel comparative analysis of FinTech disclosure levels between Islamic and conventional banks. By exploring how various governance structures influence FinTech disclosure, this research provides fresh insights into the interplay between corporate governance and financial technologies in the banking sector.

The Impact of COVID-19 Pandemic on the Jordanian Stock Market Returns Volatility: Evidence from ASE20

This research examines the impact of the COVID-19 pandemic on the volatility behavior of Amman Stock Exchange (ASE) returns using ARMA–GARCH-type models for three sub-periods: pre-COVID-19, during COVID-19, and post-COVID-19. The research finds that volatility persistence is significant across all periods, with the pandemic period showing the highest impact of shocks. Bad news has no statistically significant impact on volatility in the pre-COVID-19 period or during the pandemic, while in the post-pandemic period, good news significantly influences volatility. Additionally, there exist notable changes in the autocorrelation and the shock structure of the AR and MA components. Considering these alterations in the asymmetric effects, the AR and MA components suggest significant shifts in market dynamics, investor sentiments, and economic policies in response to pandemic experiences.

A study of mediating and moderating effects on the relationship between audit quality and integrated reporting quality among Jordanian firms

PurposeThe purpose of this research is to investigate the link between external audit quality and integrated reporting (IR) quality in the Jordanian market, a developing market. Furthermore, the research model considers the mediating effect of earnings management practices and the moderating effect of board gender diversity. As a result, it intends to provide further empirical evidence in this area.Design/methodology/approachThis research investigates its model using data from Jordanian services companies listed on the Amman Stock Exchange (ASE) during the period 2013–2022. With 430 company-year observations, the current research’s sample includes all companies in the research population for which complete data were available during the period under investigation. Data relevant to the research setting were obtained from annual disclosures and the ASE's database.FindingsThe findings of this research show that audit firm size and audit firm specialty have a positive influence on IR quality, but audit firm tenure does not. External audit quality (as proxied by the size, specialty and turnover of the audit firm) had a negative impact on earnings management practices, while earnings management practices had a negative impact on IR quality. Additionally, the findings reveal that earnings management practices completely mediate the relationship between two external audit quality proxies (audit firm size and audit firm specialty) and IR quality. Furthermore, in terms of the moderating impact of board gender diversity, it is obvious that board gender diversity favorably moderates the relationships between all external audit quality proxies and IR quality.Originality/valueUsing agency theory and stakeholder theory, this investigation fills a gap in previous literature by adding scientific explanations and empirical evidence from the Jordanian market, a developing market, in the context of the impact of audit quality on IR quality, mediated by earnings management and moderated by board gender diversity.

The effect of Board Independence on Environmental disclosure; the moderating role of Gender Diversity in Amman stock exchange

Depending on the agency theory view and response to the modern invitations to speculate gender diversity role. How it can enhance the relationship between board independence and environmental disclosure due to prior studies focus on direct relationship between them. This study seeks to ascertain how gender diversity moderates the association between board independence and environmental disclosure among non-financial firms listed on the emerging Amman stock exchange market (ASE) between 2014 and 2019. The direct and indirect relationships were examined using multiple regressions on panel data analysis; the empirical findings indicate that board independence and environmental disclosure have a positive and substantial direct link. Additionally, the findings demonstrated that gender diversity is a significant moderator in this relationship. However, this study provides managers, owners and policymakers with a set of main recommendations related to the major need for a more board independence and gender diversity in order to enhance environmental disclosure in emerging markets. Our results are useful to policymakers interested for an important framework on environmental disclosure.

The Role of International Accounting Standard 39 in Disclosing Financial Derivatives/ Financial Instruments in the Financial Statements of Jordanian Banks Listed on the Amman

This study objective to know the nature of financial derivatives of both types (stocks and bonds) and the role of International Accounting Standard (39) in disclosing them in the financial statements, in addition to identifying their problems, how they are dealt with, and what is the mechanism for disclosing them in accordance with international accounting standards. The study used the content analysis method to determine the volume of disclosure of financial derivatives in the financial statements of a number of Jordanian banks registered on the Amman Stock Exchange. The descriptive analytical method was also used in the theoretical aspect The study showed through the conclusions that the financial reports of Jordanian banks have dealings with financial instruments and that the banks have applied the standard, but only partially and in accordance with the standard (39 Financial Instruments: Recognition and Measurement), which led to a significant improvement in the measurement and disclosure of financial instruments (stocks and bonds). Thus, the auditor is able to give an impartial technical opinion The study presented several recommendations, the most important of which are: the need to pay attention to applying Accounting Standard 39 completely and not partially for the purpose of being able to compete internationally and not just at the local level through developing and qualifying employees/and resorting to foreign companies specialized in the field of applying international accounting standards.

The Effect of Audit Quality on Real Earnings Management: Evidence from Jordan

The purpose of the current study is to examine whether audit quality is capable of restricting real earnings management in a developing country such as Jordan. The fixed effect method was used to study the association between two audit quality (audit fees and audit firm size), and cash flow from operations (CFO), discretionary expenditure (DISX), and production cost (PROD) as proxies of real earnings management, for the industrial and service firms listed on the Amman Stock Exchange (ASE) during the period 2014-2023. Using 740 firm-year observations, the results showed that the audit fees (AFEE) are significantly and negatively related to cash flow from operations (CFO) and discretionary expenditure (DISX), and also significantly and positively related to production cost (PROD). Meanwhile, the result showed that the existence of audit firm size (B4) has a negative and significant effect on cash flow from operations (CFO) and production cost (PROD), and a positive and significant effect on discretionary expenditure (DISX). Further, for the control variables, the results showed that the firm size (FSIZE) has an insignificant effect on all model variants of real earnings management (REM). Meanwhile, financial leverage (LEV) has a negative effect on all model variants of real earnings management (REM). Thus, these findings provide shreds of evidence for all the regulators, investors, and executives in Jordan due to the significant impact on public policies and interest to the regulators and standard setters.

The influence of digital disclosure language adoption on decrease financial information asymmetry and increase its quality

Purpose The main purpose of this study is to determine the antecedent factors of digital financial disclosure language adoption and its impact on decreasing financial information asymmetry and increasing its quality. Design/methodology/approach The data was obtained from 116 financial managers, who are working and responsible for preparing and filing financial statements reports in listed Jordanian firms in the Amman Stock Exchange. The partial least squares structural equation modeling approach is used for data analysis. Findings The empirical results revealed that the adoption of digital financial reporting is positively influenced by perceived usefulness and perceived ease of use. Besides, the outcomes also confirm that the adoption of digital financial reporting positively influences accounting information quality, and hence hypotheses H1, H2 and H3 were accepted. Originality/value This study varies from previous studies because it is considered among the first empirical studies that determine the antecedent factors of digital financial reporting adoption and its impact on improving accounting information quality and sustainability in an empirical setting from a developing country perspective such as Jordan.

The effect of corporate governance on financial fragility in non-financial companies: a Minskyian approach

PurposeThis study aims to examine the effect of corporate governance (CG) mechanisms on financial fragility in non-financial corporations, using Nishi’s operationalization of Minsky’s financial instability hypothesis. Specifically, the study investigates the influence of board size, board independence, CEO duality and audit quality on the financial fragility of non-financial companies (NFCs).Design/methodology/approachUsing a panel logit regression model, the authors analyse annual data from (66) NFCs listed on the Amman Stock Exchange, spanning over the period 2015–2021. This methodology enables us to assess the relationships between the identified CG mechanisms and the categorical proxy of financial fragility.FindingsThe findings of this study reveal that a large share of NFCs fall within Minsky’s “Ponzi” classification, indicating elevated levels of financial vulnerability. Remarkably, the analysis demonstrates that larger board sizes and the CEO-Chairman duality exacerbate financial fragility within these firms. Conversely, the study results suggest that board independence and audit quality exhibit limited effects on financial fragility. In addition, profitability, firm size and financial leverage are identified as key predictors of financial fragility.Originality/valueThis study adds to the current literature by using a financial fragility index grounded in Minsky’s financial instability hypothesis. The constructed index is then used to examine specific CG factors in relation to financial fragility, which offers new insights into the dynamics influencing the default exposure of NFCs. Furthermore, the study findings have direct implications for policymakers and stakeholders aiming to enhance CG practices and foster financial stability in the private sector.