Amman Stock Exchange Research Articles

The Effect of Fair-value Accounting on the Value Relevance of the Balance Sheet and the Income Statement

The aim of this paper is to examine the value relevance of the balance sheet and the income statement. Specifically, this paper investigates the value relevance of book value of equity compared to the value relevance of earnings in firms that depend more on fair-value accounting. The sample of the study includes all listed firms in the Amman Stock Exchange (ASE), which are classified into two main groups: financial firms and non-financial firms. The results show that the value relevance of the balance sheet for financial firms is higher than that for the income statement. The results also show that firms with lower financial assets depend more on historical accounting and have higher-relevance income statements. The results indicate that the higher the percentage of financial assets, the more the firm depends on fair-value accounting and consequently, the balance sheet becomes more value-relevant to investors compared to the income statement.

Investigating the Influence of Financial Indicators on Stock Returns in the Presence of the COVID-19 Pandemic

In this paper, we investigate the influence of financial proxies on companies in the real estate sector listed on the Amman stock exchange during the Covid-19 pandemic. A panel data method is employed for the sample, which includes 29 listed real estate companies, for the period from 2010 to 2020. The financial proxies are considered as independent variables, which consist of earnings per share, book value per share, price-to-earnings (P/E) ratio, price-to-book value, debt ratio, and current ratio, while the market return is the dependent variable. The results revealed that all financial proxies have a significant impact on market returns. Furthermore, the financial proxies are positively and significantly correlated with market returns. The results also showed that the Covid-19 pandemic negatively affected the real estate sector returns. Decision makers in real estate companies are required to manage their working capital in an effective and efficient manner in order to deal with unforeseen short-term events as investors might use historical financial data to estimate companies’ returns.

Assessing the Impact of Greening Information Technology Tools and Technologist on Organizational Systems Sustainability in Service Companies

This research aims to assess the extent of the utilization of Green IT (MIS and AIS) tools and technologies by Jordanian service companies listed in the Amman Financial Market towards the goal of becoming sustainable. This study utilized the survey questionnaire method for collecting the data needed. Invitations to participate in this study were emailed to 135 of participants, which is consistent with the number of service companies listed in the Amman Financial Market. The number of participants was 72 which constitutes 53.3% response rate. The results of the study indicate that there is a statistically significant effect at the confidence level of 5% of green IT tools systems (MIS and AIS) on the sustainability of service companies listed on the Amman Stock Exchange. The study recommended that service companies should investigate and consider the potential positive impact that cloud computing has on organizational sustainability, and future research efforts should also focus on attempting to quantitatively assess the positive impact that each of the “greening” IT tools and technologies on organizational sustainability.

Does Financing Decision affect Company Growth? Empirical Evidence from Selected Companies in Jordan

The study investigates the impact of financing decisions on Jordanian firms' growth. Therefore, it collects data for 120 companies listed on the Amman Stock Exchange during 2008-2018. The study used a two-step difference and system GMM to test the relationship between variables. In general, results are consistent with the theory and previous findings, confirming a significant relationship between the financing decisions of firms and their performance represented by their growth. Furthermore, the study's findings suggest that firms should modify their capital structure mix to get the highest benefit level.

Does Corporate Social Responsibility Spending Enhancing the Financial Performance?

This paper examines the dynamic relationship between financial performance FP and corporate social responsibility spending CSRS in Jordan. The dynamic panel system GMM measurement was utilized for 164 listed companies in Amman stock Exchange. The results demonstrate that CSRS and accounting-based measurement have a beneficial association. There are no correlations between CSRS and market-based measurement, on the other hand. The findings indicated that Jordanian listed companies have a lot of room for improvement when it comes to exposing their CSR efforts across multiple dimensions, which might help the Jordanian government with its ongoing initiatives of social and economic transformation.

The Impact of Earnings Management Practices on the Market Value of Industrial Companies Listed on the Amman Stock Exchange: Evidence from Jordan

Reported earnings and their prediction is one of the most important factors that are relied upon in determining the value of various investments, given that the higher the earnings, the greater the possibility of distributing profits, and accordingly, stock prices are determined in the financial markets. This study aims to examine the impact of earnings management on the firm value of Jordanian industrial companies listed on the Amman Stock Exchange for 2015-2019. This study used discretionary accruals according to the modified Jones model to measure earnings management. Tobin’s Q as well is used as a proxy to firm value. Furthermore, this study used firm size, firm age, and leverage as control variables. In analyzing data, STATA is used. The results showed that earnings management has a negative but insignificant impact on firm value. On the other hand, leverage has a significant and negative effect on firm value. Firm age has a positive but insignificant effect on firm value. Firm size has a negative and significant effect on firm value.

Impact of ESG strategies integration on the operational and reputational risks

This study aimed to demonstrate the impact of strategies integration of environmental, social and corporate governance strategies (ESG) on operational and reputational risks: a literature review for insurance companies listed on the Amman Stock Exchange. where the study population consisted of 22 Jordanian insurance companies, while the sample consisted of 8 companies, and one was excluded due to the lack of data, and based on the descriptive analytical approach, the study reviewed many previous studies related to its subject, and using the method of content analysis for annual reports and disclosures issued by Major insurance companies during the period 2020-2021, where a survey list was designed to measure the extent of the research companies' commitment to environmental, social and corporate governance strategies. The study concluded with many results, perhaps the most prominent of which is the presence of disclosure about social responsibility activities in the annual reports, and that all companies focused in their activities on providing donations and support to the local community and supporting education and health issues during the Covid pandemic period,,,

The Influence of Enterprise Resource Planning System Implementation on Accrual-Based Earnings Management: Empirical Evidence from Jordan

This research provides evidence on whether enterprise resource planning (ERP) implementation affects accrual-based earnings management (AEM) in the service and manufacturing firms listed on the Amman Stock Exchange (ASE). The Huber–White’s sandwich estimator for pooled ordinary least squares (OLS) regression was utilized for this investigation as the primary statistical technique. Using three different AEM models and a sample of 390 firm-year observations for the period spanning from 2015 to 2019, this study reveals a significant and negative nexus between ERP implementation and AEM. The findings show that ERP adopting firms are less likely to engage in AEM practices than ERP non-adopting firms. In terms of contribution, the present research is considered among the first to investigate the impact of ERP system adoption on earnings management (EM) in Jordan.

The role of slack resources in explaining the relationship between corporate social responsibility disclosure and firm market value: a case from an emerging market

ABSTRACT The purpose of this study is to investigate the moderating effect of slack resources (namely, profitability and cash holdings) on the relationship between corporate social responsibility disclosure (CSRD) and firm market value. The authors test the hypothesis through performing panel data analysis for a sample of 95 non-financial Jordanian firms listed on the Amman Stock Exchange from the period 2011 to 2016. Content analysis was employed to evaluate the level of CSRD based on an index of 42 items and four themes. While the findings show no significant relationship between CSRD and firm market value, higher slack resources were found to positively moderate this relationship. The outcomes therefore suggest that slack resources accentuate the effect of CSRD on firm market value. The use of Jordanian firms is distinctive and provides valuable insight into contexts in which the market tends to place less weight on a firm's CSR activities.

The relationship between debt securities issuance, profit efficiency, and Jordanian commercial banks’ operational performance

The purpose of this study is to investigate whether or not the issuing of debt securities and the effectiveness of profit management affect Jordanian banks’ operational performance. The assessments are carried out with the help of data obtained from the financial statements of commercial banks that are listed on the Amman Stock Exchange (ASE) from 2016 to 2020. Estimation of the regression equation is performed with the help of the non-linear analysis. The study’s findings showed that the issuance of debt securities has a significant (0.02) influence on banks’ operational performance. Furthermore, profit efficiency has an insignificant (0.363) influence on banks’ operational performance. Overall, the findings of the study are consistent with those of earlier empirical research. The most important contribution of this paper is that the determination of debt security issuers’ prospects associated with the Jordanian economy can be improved, and financial institutions and commercial banks can take corrective measures to reduce variation and increase development.

A High-Dimensional Approach to Predicting Audit Opinions

ABSTRACT This study develops a model for the prediction of audit reports. The research data comprises 57881 firm-year observations for public companies listed on the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and the NASDAQ from 2000 to 2019. The dataset consists of a high dimension of predictor variables (105 variables), including accounting-based, ownership concentration, executive compensation, market price, analysts rating, macroeconomic, and audit-related variables. A commercial version of Gradient Boosting, called TreeNet®, is used to build the prediction model. The results indicate that the developed model demonstrates high performance in predicting going-concern reports with an accuracy rate of 97.5%.

Government Ownership and Corporate Cash Holdings: Empirical Evidence from the Amman Stock Exchange

While the effect of ownership structure on the level of cash holdings has been widely examined, that of government ownership has been understudied. Using a generalized method of moments (GMM) estimation on the panel data of 107 Jordanian firms listed on the Amman Stock Exchange, this research adds to the limited literature on the relationship between government ownership and the level of corporate cash holdings. Consistent with agency theory, the findings reveal that firms with government ownership hold higher levels of cash and that such ownership creates agency problems. Other types of ownership, namely individual, foreign, and block holders, were found to be insignificant. The results provide an important implication for policy makers in Jordan: in order to reduce agency problems associated with government ownership, the government should revise its ownership policy and ensure it specifies clear purposes and expectations of business ownership and how it intends to exercise its rights as owner.

The Extent of Using Lean Accounting Tools and their Impact on the Achievement of a Competitive Advantage in the Jordanian Commercial Banks

This study aimed to explore the extent of using lean accounting tools and their impact on the achievement of a competitive advantage in the Jordanian commercial banks. To meet the goals of this study, the researcher designed a questionnaire. The questionnaire forms were passed to Jordanian commercial banks that were listed on Amman stock exchange before the period 31/12/2020. Those banks are thirteen banks. A purposive sample was chosen. It consists from 78 administrators working in Jordanian commercial banks.The researcher found that the extent of using lean accounting tools in those banks is high. It was found that the extent of exerting effort by those banks to achieve a competitive advantage is high. It was found that using lean accounting tools jointly has an impact on achieving a competitive advantage in those banks. In the light of the study’s results, the researcher offered several recommendations. They recommend providing more attention to the extent of using lean accounting tools by the management of those banks. That should be done to benefit from the merits of implementing them and seek achieving a competitive advantage.

Determinants of Banks’ Credit Risk: Evidence from Jordanian Banks Listed on Amman Stock Exchange

This paper aims to identify the determinants of credit risk in Jordanian banks. The sample consist of all banks listed on Amman Stock Exchange (ASE); which include 13 conventional banks and 2 Islamic banks, with the data covering the period from 2012 - 2019. Credit risk is represented by the percentage of non-performing loans over total loans given by the bank. Both bank-specific variables and macroeconomic variables that are likely to influence credit risk are examined. Based on the multiple regression analysis, the results indicate that the level of credit risk faced by Jordanian banks is negatively related to each of the banks’ profitability, interest income earned by the bank, the size of the bank, and the type of the bank. The results also show that there is a significant positive relationship between the banks’ loans quality and the unemployment rate in Jordan with the level of credit risk. The results, however, indicate that there is no a significant relationship between liquidity, inflation, and gross domestic products with credit risk faced by Jordanian banks.
 
 Received: 27 June 2022 / Accepted: 28 August 2022 / Published: 2 September 2022

The influence of ownership structure on the extent of CSR reporting: An emerging market study

AbstractTo examine how different ownership structures, varying from diverse ownership bases to narrow ownership bases, influence the extent of corporate social responsibility (CSR) reporting by companies in emerging market. The motivation for this study is the reported inconsistent results for this association in developing countries and the lack of research in emerging markets. Eight hundred observations of 80 nonfinancial sector listed companies in the Amman Stock Exchange for the period 2006 to 2015 were used for a content analysis to assess the extent of CSR reporting. Ordinary least square multiple regression analysis was undertaken to examine the association between five different ownership structures and their extent of CSR reporting. The results reveal three separate associations between the types of ownership and the extent of CSR reporting. First, the two types of ownership (foreign and government) have a significant and positive influence on the extent of CSR reporting. Second, another two types of ownership (Family and managerial) have a significantly negative association. Finally, institutional ownership has an insignificant and negligible influence on the extent of CSR reporting. These findings provide insights into how ownership structure influences the CSR reporting extent by emerging market companies such as Jordan. These findings suggest that policy makers, regulatory bodies, companies, and investors should increase their awareness about how different concentration of company ownership influences the extent companies voluntarily disclose CSR reporting. The evidence adds to the limited body of knowledge about different ownership groups' influence on the extent of CSR reporting in a developing country because few empirical studies have undertaken such a comprehensive analysis of this association.

Capital Structure and Firm Value Relationship: The Moderating Role of Profitability and Firm Size Evidence from Amman Stock Exchange

The study objects for determining whether there is an impact of financial leverage in the capital structure on firm market value, and to determine whether profitability and size of firms play a moderating effect role on the impact relationship of financial leverage on firm market value. The cluster sampling method is used in the selection of the sample among the listed firms at Amman Stock Exchange, where the utility-energy and the food-beverage listed firms are the two cluster, which is selected to constitute the sample. The secondary data covering the period 2011-2020, of the entire listed 5 utility-energy and 8 food beverage firms, had collected and used in the analysis and hypotheses testing. Tobin;s Q is used as an indicator for firm value, and debt ratio is used as a measure of debt in the capital structure mixing. Profitability is measured through the return on assets ratio, while the natural logarithms of total assets is used as a measure for firm size. Using the regression method, the study shows that debt in the capital structure has insignificant impact on firm value, while the results demonstrate that profitability and firm size, each of which, plays a moderating effect role in the effect relationship of debt in the capital structure, on firm market value.

OPERATIONAL RISKS AND FINANCIAL PERFORMANCE – THE CONTEXT OF THE JORDANIAN BANKING ENVIRONMENT

The 2008 financial crisis and the eruption of the COVID-19 pandemic have forced banks in Jordan to change their operation pattern. Thus, the main purpose of this study is to examine the impact of operations risk measured by the capital that commercial banks must hold to cover operational risk exposure on listed Jordanian commercial banks performance, represented in two dependent variables: earning per share (EPS) and stock market value (MV). The study used a panel data methodology constructed from the financial statements of all 13 commercial banks listed at Amman Stock Exchange (ASE) for the period 2006-2019. Based on regression analysis, the results explored a significant positive impact on EPS and MV as a proxy of the financial performance. Also, the results, indicated that operational risks, have more explanation power on EPS than on MV. These results contributed to the current literature by providing a roper understanding of the impact of operational risk on financial performance in emerging markets, which could draw some recommendations to banks’ management toward improving the analysis of operational risk.

The effect of ownership structure and board structure on accounting conservatism throughout financial reporting: Evidence from Jordanian industrial corporations

This study is based upon constructing two models for quantifying the impact of ownership structure upon accounting conservatism and the impact of board structure upon accounting conservatism for the industrial enterprises registered with the Amman Stock Exchange ASE from 2011 to 2020. Moreover, the finding revealed that conservatism was at a low level among industrial enterprises in Jordan. Family ownership, board independence and large investor ownership have moral impact upon accounting reservations though not upon institutional ownership, managerial ownership, board size, dispersed ownership, board duality or board meetings. So that financial reporting accuracy can be preserved, the research urges against the abandonment of conservative accounting rule adoption, especially in the context of the current economic position of Jordan, with restriction and disclosure of ownership quantities in their various forms within industrial facilities within Jordan. Great attention should be paid to characteristics in boards of directors so that the various stakeholders that are engaged in the firm are protected and the beneficial behavior of the management can be limited.

The Relationship between Corporate Governance Quality and Firm Performance: The Moderating Role of Capital Structure

This study aims to explore whether capital structure (CS) has a contingent role in the relationship between corporate governance (CG) quality and firm performance. The empirical findings indicate that CG quality had a positive and significant effect on the performance of Jordanian non-financial firms listed on the Amman Stock Exchange (ASE) from 2014 to 2019. Additionally, the moderate effect of the CS reinforces this relationship. These results are robust to alternative econometric specifications and variable definitions. This study utilizes certain firm-specific characteristics to represent the CS to assess its role as a moderating variable in the relationship between CG quality and firm performance. This study makes a contribution to the literature by showing that CS can strengthen the relationship between CG quality and firm performance. The results have important managerial implications for the practice of CG in developing countries. Firms in developing countries can enhance performance by implementing and abiding by good governance practices. Moreover, firms in developing countries should adopt effective financial strategies regarding CS to enhance the relationship between CG quality and firm performance. Finally, potential investors should consider the debt level in the CS of non-financial firms in Jordan when making investment decisions.

Audit committee and impression management in financial annual reports: evidence from Jordan

PurposeThe current paper aims at exploring the audit committee characteristics’ effect on impression management.Design/methodology/approachThe methodology is based on the use of the content analysis of financial annual reports, as data of a 69-company sample study from 2015 to 2019 attained from “Amman Stock Exchange” has been analyzed. Moreover, multiple regression analysis on panel data was employed.FindingsThe results show that the independence of the audit committee, the financial expertise of the audit committee and female members negatively affect impression management, implying that these characteristics mitigate financial reporting manipulation and decrease the practices of impression management. However, the findings detect no significant influence for committee meetings on impression management.Research limitations/implicationsNotably, the current work is applicable and useful for understanding the audit committee’s role in enhancing the financial reporting’s quality, along with the significance of the audit committee in growing the stakeholder’s confidence in financial reporting. In light of these results, regulatory bodies’ efforts are encouraged to create additional strategies and instructions to ensure the trustiness and credibility of financial reporting.Originality/valueThis paper will be useful to companies that want to improve the quality of financial reporting and decrease the impression of management’s effect on financial reporting’s readers. Moreover, this paper contributes to the literature on impression management by exploring the effect of audit committees on impression management of annual financial reports of the users in the context of emerging markets and Middle East countries, particularly Jordan.