Amman Stock Exchange Research Articles

The Relationship between Capital Structure and Performance of Non-Financial Firms Listed on the Amman Stock Exchange

The aim of this study is to take a step forward to examine the relationship between capital structure and firm performance particularly concentrating on the firms listed on Amman Stock Exchange (ASE). The current study uses 95 sample firms from non-financial firms listed on ASE. The period of the present study is (2013 - 2017). The regressions have been shown and the results are showed rely upon the fixed effect model. The results show that all variables represent capital structure by Total Debt to Total Assets, Long Term Debt to Total Assets, Firm Size, Sales growth, Tangibility, and Liquidity have the relationship to firm’s performance represents by return on assets and Tobin’s Q. Sales growth and Total Debt to Total Assets have statistically positive significant relationship with firm’s performance. Meanwhile, Long Term Debt to Total Assets and Liquidity show a statistically insignificant relationship with firm performance. Similarly, Tangibility has a statistically negative significant relationship with Tobin’s Q and return on assets. Lastly, the study is contributed to top managers by providing value of an effective and efficient capital structure to firm performance in Jordanian business environment, by facilitating them in improving their capital structures to maximise shareholders’ wealth as well as findings of this study will be important to other researchers by providing empirical evidence on the influence of capital structure on firm performance. Keywords : Amman Stock Exchange, Capital Structure, Firm’s Performance, Jordan DOI: 10.7176/RJFA/13-2-09 Publication date: January 31 st 2022

The Relationship Between Liquidity Risk and Profitability in the Commercial Banks Listed in Amman Stock Exchange

This study aimed to evolve the relationship between liquidity risk and the profitability among commercial banks (n=16) listed on the Amman Stock Exchange. The evolution was based on the annual reports from 2010 to 2019. A suitable multiple regression model was used to achieve this goal, which indicated no statistically significant relationship between the liquidity risk indicators and the majority of profitability indicators. However, the Cash Reserve Ratio (CRR) index was statistically significant with the Utilization Ratio (UR). Additionally, there was a statistically significant relationship between the return on equity and the legal reserve ratios and the funds’ investment. This study recommends raising the awareness of the relationship between the indicators of liquidity risk and profitability among the financial policy planer in Jordanian commercial banks because the maintained level of liquidity will undoubtedly affect the volume of investments in banks. Thus, influencing the bank market value by increasing the share on the stock exchange.

Herding behaviours and trading volume: evidence from Amman Stock Exchange

The purpose of this paper is to examine the presence of herding behaviour in Amman Stock Exchange (ASE). Specifically, it aims to provide empirical evidence on the relationship between herding behaviour, trading volume and market liquidity levels. Using a free float share index consisting of 100 companies, the present study employs the approach developed by Chang et al. (2000). It presents an analysis of herding in relation to trading volume and liquidity relationships performed by OLS, VAR estimation and Granger causality tests. Results of daily data analysis for the period 2006 to 2017 indicate strong evidence of herding behaviour in ASE, particularly during the crisis period. The results also proved that there is a strong correlation between herding and trading volume in both directions, and intensification of herding in periods of medium or high market liquidity, but no evidence of herding at low liquidity levels.

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

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.

Managerial Ownership and Real Activities Earnings Management

This research examines the relationship between managerial ownership and opportunistic managerial behavior relating to earnings management. Two apparently conflicting effects of managerial ownership on managers' incentives: the incentive alignment effect and the management entrenchment effect. Following previous research, abnormal operating cash flows, abnormal production costs, and abnormal discretionary expenses are used as a proxy for real activities earnings management. A new proxy for managerial ownership is developed in this research to capture the institutional setting of listed firms in Jordan. Using a sample of manufacturing firms listed on Amman Stock Exchange between 2017 and 2021, the results suggest that managerial ownership improves the quality of annual earnings by reducing the levels of abnormal operating cash flows and abnormal production costs but not abnormal discretionary expenses. This finding substantiates the incentive alignment effect in Jordan.

Managerial Ownership and Accruals Earnings Management

This research examines the relationship between managerial ownership and opportunistic managerial behavior relating to earnings management. Two apparently conflicting effects of managerial ownership on managers' incentives: the incentive alignment effect and the management entrenchment effect. While abnormal accruals are used as a proxy for earnings management, a new proxy for managerial ownership is developed in this research to capture the institutional setting of listed firms in Jordan. Using a sample of manufacturing firms listed on Amman Stock Exchange between 2017 and 2021, the results suggest that managerial ownership improve the quality of annual earnings by reducing the levels of earnings management. This finding substantiates the incentive alignment effect in Jordan.

Can outsourcing be the answer for developing economies The case of Jordan

This study explores outsourcing activities, strategies and attitudes of firms in developing economies. The primary objective is testing whether or not outsourcing answers firms' questions in developing economies by analysing the impact of outsourcing types and levels on firms' abilities to survive and grow. A review of the outsourcing literature illustrates that firms in developing economies can apply outsourcing strategies to strengthen their limited resources and improve performance. Primary and secondary collected data from the Amman Stock Exchange (ASE) listed firms during the period from 2008-2018 have been analysed. Several findings regarding the types, attitudes, motives and expected benefits of outsourcing have been identified across the sectors. Despite the strong positive attitudes toward outsourcing within the Jordanian context, outsourcing did not have a clear beneficial effect on the firms' value and/or growth across the sectors.

Managerial ownership and executive compensations: Interaction and impact on earnings management practices in an emerging economy

The study aimed to examine the relationship between executive compensations and earnings management. Also, it investigates whether managerial ownership influences that relation for the non-financial firms listed in Amman Stock Exchange (ASE) during the period 2010–2019. The study provides evidence that firms with a higher level of executive compensations are associated with a low level of earnings management practices. Results also show that the mitigating role of executive compensations is moderated in firms with managerial ownership, and executive compensations level in firms with managerial ownership is unlikely to be effective. In an attempt to maximize the personal interest, managers with sufficient ownership managed earnings in an opportunistic way to exploit the minority interest through taking advantage of the compensations contracts loopholes.

Long-Term General Index Prediction Based on Feature Selection and Search Methods: Amman Stock Exchange Market

Stock markets are an essential backbone for the economy worldwide; their indices provide all interested parties with indicators regarding the performance of firms listed in the financial market due to tracking the daily transactions. This study aims to investigate factors that affect the stock exchange directly so that it simplifies building a prediction model for the exchange index in Jordan’s financial market. The study hypothesis assumes that some sub-sectors are most influential in creating the stock market prediction model. Therefore, this study applies four feature selection methods on 23 sub-sectors and Amman Stock Exchange Index (ASEI100) for the period 2008–2018. The top 10 attributes from each selection method are combined, and the frequency table is used to find the highly trusted attributes. Moreover, linear regression with ordinary least square regression is used to test the validity of the top factors that frequently occurred in the four methods and their effect on ASEI. The results found that there are six main sub-sectors directly affecting the general index in Jordan: Health Care Services, Mining and Extraction Industries, Textiles, Leather and Clothing, Real Estate, Financial Services and Transportation. These sectors can be utilised to predict the movements of the Amman Stock Exchange Index in Jordan. Also, the linear regression model output showed a statistically significant relationship between the six sub-sectors (independent variables) and ASEI (dependent variable). Investors can use this paper’s findings to signal the most important sectors in Jordan. Thus, it helps in taking investment decisions.

An empirical investigation of the impact of firm characteristics on the smoothness of dividend

This paper empirically investigates the smoothness of dividends on non-financial companies in Jordan by applying the asymmetric partial adjustment model. In addition, this research investigated the data for 65 non-financial companies (37 industrial and 28 services) listed on the Amman Stock Exchange (ASE) covering the period 1997–2020. Fixed and random-effects techniques have been applied to check the smoothness of dividends. The results confirmed that the non-financial Jordanian companies smooth their dividends at a moderate rate, our results contradict the signaling theory; we find that large companies smooth their dividend faster than small ones. Furthermore, in line with the agency cost theory, low-leveraged firms smooth their dividends faster than high-leveraged firms. Also, our results confirmed that highly profitable companies smooth their dividend more and this comes in line with the signaling theory.

Effectiveness of the board of directors' performance in Jordan: The moderating effect of enterprise risk management

This study aims to investigate the moderating effect of enterprise risk management on the relationship between the board of directors’ effectiveness on accounting and market performance in Jordan. The current study uses panel data of 684 firm-year observations, employed regression analysis and analysis of annual reports of 76 listed companies on the Amman stock exchange (ASE) from 2009 to 2017 covering 9 years. The findings of the hierarchical regression analysis showed that the enterprise risk management has a significant positive moderating effect on the relationship between the board of directors’ effectiveness on accounting and market performance in Jordan. The findings reveal that enterprise risk management positively moderated the relationship between board of directors’ effectiveness on Return on Assets, Return on Equity, and Tobin’s Q. It also moderated the interaction of board of directors’ effectiveness intercept enterprise risk management on Return on Assets and Return on Equity, which were found positive and significant. The findings of this paper can provide crucial conclusions and recommendations that clarify the relationship between the board of directors’ effectiveness and the accounting and market performance in Jordan and the moderate impact of the enterprise risk management.

Green supply chain management and competitive advantage: The mediating role of organizational ambidexterity

This study develops a research framework to study the impact of green supply chains with three dimensions, namely green purchasing, green manufacturing, and green marketing to achieve competitive advantage with the existence of organizational ambidexterity as a mediating variable in Jordanian industrial companies. The study targeted the most important Jordanian industrial companies, which included 46 industrial companies out of 66 companies listed on the Amman Stock Exchange. The researchers personally administered 181 questionnaires, responses were analyzed using descriptive statistics, and the appropriate statistical methods were chosen to test the hypotheses of the study and reach its results. The findings indicate that all elements of green supply chain management, namely green purchasing, green manufacturing, and green marketing had a significant impact on competitive advantage. Also, green manufacturing and green marketing had a significant effect on organizational ambidexterity, but there was no significant impact for green purchasing on organizational ambidexterity, finally, the results of the study showed that organizational ambidexterity plays a significant mediating role in the relationship between green manufacturing, green marketing, and competitive advantage.

The market reaction to profitability: Does leverage matter?

This study examined the market reaction to profitability by discussing the impact of dividends yield (DY) and earnings yield (EY) based on leverage (LVRG), as a control variable, on stocks’ prices (SP) of the industrial companies listed on Amman Stock Exchange (ASE), for the whole sample and the two subsamples (low and high leveraged companies). For this purpose, the data of the three samples were analyzed, for seven years from 2011 to 2017. The multiple regression analysis results showed that based on the leverage ratio (LVRG), as a control variable, there is a significant effect of DY on SP at 1% significance level, and an insignificant effect of EY on SP at 5% significance level, in the high leveraged sample. The impact of DY and EY on SP at 5% significance level in the whole and low leveraged samples is insignificant.

The Impact of External Auditors size on Earnings Management: Evidence from Jordan

The current study offers empirical evidence on the association that exists between the audit firm size and earnings management based on a sample of 64 manufacturing firms that are listed with the Amman Stock Exchange (ASE) from 2017 to 2021. From the results of the study, there is a significant negative association between the audit firm size and earnings management. These results have implications for policy makers and regulatory bodies in Jordan since they highlight the need to improve the good corporate governance practices and attempt to constrain the incidence of earnings management in Jordanian firms.

Critical success factors of cloud enterprise resource planning systems and financial performance: Evidence from emerging markets

Cloud ERP (C-ERP) systems help firms to reach greater levels of sustainable performance (Gupta, Qian, Bhushan, & Luo, 2019). Ali (2016) demonstrate that the enterprise resource planning (ERP) system implementation influences financial performance indicators. Huang, Rahim, Foster, and Anwar (2021) had investigated and identified the critical success factors (CSFs) which may affect the successful implementation of C-ERP systems. However, no empirical evidence was found on the relationship between C-ERP critical success factors and financial performance. This study examined the effect of key CSFs of the C-ERP systems on financial performance in the post-implementation stage. An online questionnaire was developed to collect data about CSFs in C-ERP firms. The financial ratios were collected from the Amman Stock Exchange (ASE) filings. OLS analysis suggests that financial performance is affected by technological competence, management support, organizational culture, and system characteristics. The study provides empirical evidence on the cause-effect relationship which emphasizes the difference made in long-term financial success by the various managerial techniques. The results provide practical implications to management and service providers that help in installing and maintaining C-ERP systems.

Audit Committee Characteristics and Earnings Management: Evidence from Jordan

This study investigates whether earnings management is influenced by the audit committee characteristics. This study uses a secondary-data and the population study's consists of all industrial firms listed on Amman Stock Exchange (ASE) over the period 2009-2013. Using a random effect panel data model, the results reveal that audit committee independence and audit committee financial expertise are negatively associated with earnings management at significant level. Moreover, the results indicate that a significant relationship between audit committee size and earnings management but positive direction. These results have implications for policy makers and regulatory bodies in Jordan since they highlight the need to improve the good corporate governance practices and attempt to constrain the incidence of earnings management in Jordanian firms.

The Impact of Boards of Directors’ Characteristics on Cash Holdings

This study examined the influence of corporate governance on company cash holding by explaining the relationship between board size, board independence, board gender and cash holding using a sample of 87 non-financial companies including industrial and service companies that listed on the Amman Stock Exchange from 2018 to 2020. By using random-effect generalized least square (GLS) regression model. The findings indicate that board size negatively influences cash holdings, while board gender has a positive association with cash holdings. Further, board independence did not have a direct effect on cash holdings in Jordan. This research contributes to the development of improved corporate governance policies that can help improve firm cash holdings. This study encourages Jordanian companies to use women who can give better monitoring services while also benefiting from their experiences. The results, which are robust to a range of alternative proxies and to additional tests, provide new insights into the determinants of level cash holdings.

Corporate social responsibilities and financial reporting quality: Evidence from Jordanian manufacturing firms

The basic aim of the ongoing article is to examine the impact of social corporate responsibilities on the financial reporting quality of Jordanian manufacturing firms. For this purpose, data has been extracted from the top fifteen manufacturing companies by using corporate reports along with the Amman Stock Exchange from 2010 to 2020. The random effect model along with the generalized method of moment (GMM) has been executed for analysis purposes. The results revealed that social corporate responsibilities have positively impacted on the financial reporting quality of the Jordanian manufacturing firms. These findings have been guided to the regulators that they should provide the focus on the social corporate responsibilities that enhance the quality of financial reporting of the firm. The findings of the current study may be helpful for the manufacturing firm who wants to produce better quality of financial reporting along with the upcoming studies who want to investigate this area in their studies.

Ownership, control, group affiliations, and wealth concentration: The case of a developing market

The aim of this paper is to assess ownership and control of Jordanian listed firms by identifying group affiliations, control-enhancing mechanisms, and the wealth of controlling owners. Hand-collected data for 237 firms listed on the Amman Stock Exchange (ASE) is used to identify ultimate owners, construct affiliated groups, and compute the separation between cash flow rights and control rights created by pyramid structures and cross-holdings. The findings indicate that more than one-third of listed firms are group-affiliated, the majority of listed firms are controlled by families then by foreigners and a small number of firms are controlled by the state. They also indicate that family and foreign investors use pyramids to enhance their control of business groups creating a wedge between cash flow and control rights with pronounced use of pyramids among foreign firms. In addition, the top family and foreign owners control at least 22% of corporate assets with half of this control being exercised by foreign investors originating from the Gulf region. The latter finding has important implications regarding the ongoing impact of the Arab Gulf on capital formation in the Middle East and North Africa (MENA) region.

An Evaluation of the financial soundness of insurance firms in the Amman Stock Exchange

An Evaluation of the financial soundness of insurance firms in the Amman Stock Exchange