Amman Stock Exchange Research Articles

Profitability measures and their impact on interpreting changes in market value added (MVA): Evidence from pharmaceutical and chemical companies

Investors and company managements often rely on traditional performance evaluation indicators, such as return on equity, return on assets, and other financial ratios, to explain changes in a company’s market value added (MVA). However, the effectiveness of these traditional measures in explaining market value fluctuations remains uncertain. This research aims to investigate the impact of various profitability measures, namely return on equity, gross profit margin, operating profit margin, and return on assets, on explaining changes in the MVA of pharmaceutical and chemical companies listed on the Amman Stock Exchange. To achieve the study’s objectives, we analyzed the published financial statements of a sample consisting of 14 industrial companies out of a total of 53 companies listed on the Amman Stock Exchange during the period from 2008 to 2022. Relevant financial indicators were extracted from these statements to serve the purposes of the study. Correlation coefficients were employed to measure the extent to which the independent variables (profitability measures) could interpret changes in the dependent variable (MVA). One of the most significant findings of the study is that three dimensions of profitability measures have a statistically significant impact on explaining changes in the MVA of pharmaceutical and chemical companies listed on the Amman Stock Exchange, albeit to varying degrees. This suggests that traditional profitability measures still play a crucial role in influencing market perceptions of a company’s value, despite the potential limitations of these measures in capturing the full scope of a company’s performance and potential.

The impact of information technology capability on audit report lag and audit fees: empirical evidence from the COVID-19 pandemic

Purpose This study aims to examine the impact of client information technology (IT) capabilities on audit report lag and audit fees in Jordanian companies listed on the Amman Stock Exchange (ASE) during the COVID-19 pandemic. Design/methodology/approach This study analysed financial and non-financial data from 72 Jordanian public shareholding companies listed on the ASE between 2014 and 2021. Using fixed- and random-effects models, the authors examined the impact of client IT capabilities on audit report lag and audit fees. The authors also examined how the COVID-19 pandemic might affect audit report lag and audit fees. The analysis incorporated various control variables specific to the Jordanian context to ensure accuracy. Findings Empirical evidence indicates that client IT capabilities do not significantly impact audit report lag and audit fees. In contrast, the COVID-19 pandemic has positively impacted audit report lag and audit fees, leading to an increase in audit report lag of 60 to 67 days and an increase in audit fees of approximately 15%. It is worth noting that these effects are more pronounced when influenced by factors including return on assets, company losses and audits conducted by the Big 4 firms. Research limitations/implications The scope of this study, which focuses on Jordanian firms, may limit the generalisability of the findings to other contexts. Reliance on aggregate IT infrastructure and software assets as proxies for IT capabilities might not fully capture their multifaceted nature, overlooking the qualitative aspects crucial for audit outcomes. Furthermore, excluding external factors such as governmental regulations underscores the need for future research to explore the nuanced interplay between IT capabilities, internal control systems and regulatory environments, enriching our understanding of audit practices. Originality/value This study contributes to auditing literature by examining the interplay between IT capabilities and audit processes during the COVID-19 pandemic in Jordan. This study highlights the unexpected finding that IT capabilities have minimal impact on audit report lags and fees, opening new avenues for research on how pandemics and similar crises can reshape auditing practices and influence regulatory policies in an evolving economic environment.

Narrative disclosure and earnings quality: what is the nexus? Evidence from emerging countries

PurposeNarrative disclosures offer further elucidation of a company's financial performance beyond what is presented in numerical format. This can assist stakeholders in gaining a deeper comprehension of the elements that impact reported earnings, thereby improving the quality of financial information. The current research explores the impact of narrative disclosure on the earnings quality of firms listed on the Amman Stock Exchange (ASE).Design/methodology/approachAppropriating an index to measure the narrative disclosure level in the research sample firms, the research utilizes an analysis of the textual content of nonfinancial reports and statements issued by the management of the ASE-listed nonfinancial firms between 2013 and 2022. The financial statements issued in the annual financial reports are also adopted to extract data on earnings quality and the controlling variables. The analysis of the data and attainment of the findings necessitate using the panel data.FindingsIt is indicated that narrative disclosure affects earnings quality. To be precise, the greater the narrative disclosure, the lower the absolute value of the voluntary discretionary accruals and thus the higher the quality of accounting earnings.Research limitations/implicationsThe findings contribute to new research on disclosure issues, particularly narrative disclosure, which enhances reader confidence in financial and nonfinancial reports and prevents misleading and manipulated information.Originality/valueThis research helps decision-makers understand the relationship between reports, statements and earnings quality in a firm. It's unique in exploring this relationship, especially in developing countries. The study is the first of its kind in Jordan, known for its economic stability and strategic location in the Middle East, making its findings applicable to similar environments.

Business intelligence competencies and their impact on organizational ambidexterity

In Jordan’s banking sector, organizations face the dual challenge of stability and innovation. Achieving this balance requires a deep grasp of leveraging capabilities for existing opportunities and exploring new ones. The key lies at the intersection of business intelligence and organizational ambidexterity. Therefore, this study has investigated the relationship between business intelligence and organizational ambidexterity within the Jordanian banking sector. It examined the impact of managerial, technical, and cultural competencies of business intelligence on organizational ambidexterity in Jordanian commercial banks listed on the Amman Stock Exchange. The quantitative study involved 449 bank employees. The data were gathered via a questionnaire, and the responses were analyzed using R language version 4.2.2. The results indicated that managerial competencies (z = 8.26, p = 0.000) and technical competencies (z = 4.09, p = 0.000) exhibit statistically significant positive direct effects on organizational ambidexterity. Additionally, cultural competencies were found to have a statistically significant direct effect on organizational ambidexterity (z = 2.083, p = 0.037). Managerial, technical, and cultural business intelligence competencies play crucial roles in the adoption of organizational ambidexterity among Jordanian commercial banks. Achieving organizational ambidexterity necessitates integrating these competencies with organizational capabilities.

The Relationship between Oil Prices and Stock Market: Evidence from Jordan

Objectives: This study aims to investigate the dynamic short- and long-run relationship between oil returns and stock market returns. Methods: Daily data from the Amman Stock Exchange (ASE) spanning the period from 2013 to 2022 is analyzed using the vector autoregression (VAR) model. The VAR model is employed to assess the short-run dynamic impact of oil returns on stock market returns. Granger causality tests are conducted to examine the causal relationship between oil returns and stock market returns. Additionally, the Johansen-Juselius integration test is utilized to investigate long-run cointegration between the two variables. Results: The results from the vector autoregression model (VAR) reveal a statistically significant positive effect of oil returns on the returns of the general index, industry index, and financial index of the ASE. The analysis does not conclusively establish causality between oil prices and stock market returns. However, it identifies highly significant long-run cointegration between oil returns and the returns of all stock market indexes in the ASE. The robustness of these findings is confirmed across different data frequencies and macroeconomic conditions. Conclusions: The study finds that oil prices exert a positive influence on market returns in the Amman Stock Exchange both in the short and long run. These findings hold important implications for academics and investors in Jordan, suggesting potential avenues for further research and informing investment strategies in relation to oil price fluctuations.

Assessing the Financial Health of the Company and its Relationship to its Market Value Added: Evidence from Industrial Companies Listed on the Amman Stock Exchange for the Period (2013-2021)

Purpose: The research aimed to analyze the relationship between the financial health of the company and the market value added assuming a significant correlation between the two variables. Methodology: Financial health was measured based on the Z-Score model while the market value added (MVA) was measured based on the capital invested in the company and the market value of the company. The sample of the study consisted of (8) industrial companies listed on the Amman Stock Exchange for the period (2013-2021). The principal data utilized in the analysis came from the balance sheets and profit and loss reports that were available on the official websites of the research sample companies. Findings: It was revealed through the analysis of the two variables that the company (APOT) shows higher financial health and market value added than the rest of the companies, followed by a number of companies in the research sample that had good financial health and market value added. Results of the analysis of the relationship between the two variables showed a significant positive relationship between the financial health of the company and the market value added, meaning that the better the financial health of the company, the more its market value increases and thus wealth is added to the owners. Unique Contribution to Theory, Practice and Policy: The results of this work can be used to improve the financial performance of companies, which calls for regular evaluation of the financial situation, identification of strengths and weaknesses in one's financial position, and an effort to mitigate risks and correct any shortcomings prior to their representation in the financial statements, The firm must also follow a strong financial strategy to achieve success and sustainability in the financial market.

Testing the weak-form efficiency of Arab stock markets after the COVID-19 pandemic

Weak-form efficiency means that stock prices should reflect all historical information and follow a random walk. This study examines the effect of the COVID-19 pandemic on the stock market weak-form efficiency of Arab countries, namely, Jordan, Lebanon, Kuwait, Morocco, Oman, Palestine, Bahrain, Egypt, Iraq, Qatar, Saudi Arabia, the United Arab Emirates, Syria, Tunisia, and Sudan. Daily data from July 1st, 2021 to November 12th, 2022 (370 trading days) are used to cover the period after starting the pandemic. The variance ratio and the runs test are used to test return predictability. The results show that the variance ratio values of Boursa Kuwait, the Egyptian Exchange, Tadawul, and the Amman Stock Exchange are statistically significant, indicating that their returns are unpredictable. In specific, the indices of these stock markets follow a random walk, and their price changes are independent. This is evidence that these stock markets are efficient at a weak level. In contrast, the insignificant values of the variance ratio indicate that returns are predictable in other Arab stock exchanges after the pandemic era. The findings of the Egyptian Exchange, Tadawul, and the Amman Stock Exchange are confirmed using the run test of weak-form efficiency. It reveals that the indices of these stock exchanges follow a random walk, while the indices of other Arab stock markets do not.

The effect of tax avoidance on firm value with leverage as a moderating variable

This study investigated the effect of tax avoidance (TAV) on company value in Jordan, with a specific focus on the moderating role of leverage. The sample is 55 Jordanian industrial firms listed on the Amman Stock Exchange for the study period from 2005 to 2022. Given the evolving regulatory landscape and the importance of tax planning strategies for corporate performance, understanding these dynamics is critical. Employing panel data analysis spanning several years, the study examined the link between tax avoidance, leverage, and company value. The results indicated a significant negative association between TAV and firm value (the correlation between them is –29.3%), suggesting that firms engaging in higher levels of TAV experience lower market valuations. Additionally, the analysis reveals that leverage plays a crucial moderating role in this relationship, amplifying the negative impact of TAV on firm value. The study also found a strong correlation between firm value and size, and the relationship between firm value and ROA remains significant and positive. These findings provided valuable information for policymakers, corporate executives, and investors navigating the complexities of contemporary business environments in Jordan and beyond.

The Measurement of Blockchain Technology in Financial Reports in Commercial Banks

The objective of the present study is to measure the impact of blockchain technology on financial reports. The study utilizes a time series analysis covering eleven commercial banks listed on the Amman Stock Exchange from 2009 to 2019. Two key measures, namely other operating expenses and customer deposits are employed in the Return on Assets (ROA). The findings indicate that blockchain technology can be quantified by 0.038 of other operating expenses. However, there are no discernible indications of measuring blockchain technology through customer deposits. The study suggests that blockchain technology is a double-edged sword; when not utilized as required, it leads to increased expenses, and conversely, its effective exploitation can have cost-reducing effects. In other words, operational inefficiencies or heterogeneity are associated with elevated costs associated with implementing blockchain technology. Doi: 10.28991/HIJ-2024-05-02-014 Full Text: PDF

The impact of external auditors with forensic accounting competencies on auditee firm performance

The purpose of this study is to examine how the presence of auditors with forensic accounting skills impacts the financial performance of audited companies. Using a quantitative approach, this research employs linear regression analysis and examines a sample of 74 companies from the industrial and service sectors listed on the Amman Stock Exchange between 2012 and 2021. The findings reveal that external auditors with forensic accounting competencies have a positive impact on the financial performance of audited companies. The insights presented in this study could serve as valuable tools for improving the financial performance of companies in the service and industry sectors, highlighting the importance of supporting and promoting the skills and competencies of forensic accountants.

Technology factors and ERP system efficiency in the Jordanian industrial firms: does company size matter?

The study was structured to investigate the impact of technological factors on the effectiveness of enterprise resource planning (ERP) in Jordanian industrial firms, using a descriptive-analytical approach. This study also examines company size as a moderator variable, which has been measured using the logarithm of total assets extracted from each firm’s annual report. The study’s target population consisted of all Jordanian industrial firms listed on the Amman Stock Exchange, totaling 55 firms. Managers participated as respondents, with 220 questionnaires distributed electronically, averaging four questionnaires per company. After data collection, 92 valid questionnaires were used for statistical analysis. The findings indicate a significant and positive relationship between technological factors (such as ease of use, perceived usefulness, and digital proficiency) and ERP system effectiveness in Jordanian industrial firms. However, the study revealed that trust, as one of the technological factors, did not significantly impact ERP system efficiency. Additionally, it was found that the moderating role of company size moderates positively the relationship between two technological factors (i.e., perceived usefulness and digital proficiency), and ERP system efficiency. The research suggests that industrial firms in Jordan should take into account technological factors, including factors like ease of use, perceived usefulness, and digital proficiency, to remain current with advancements that can improve the efficiency of ERP systems. This is important due to the positive influence it can have on the operational effectiveness of Jordanian industrial companies, aiding them in their planning and decision-making processes.

Does corporate governance moderate the impact of earnings management on capital structure of the listed corporations on Palestine and Amman Bourses

The purpose of this research is to investigate the moderating role of corporate governance on the relationship between earnings management and debt level in capital structure. The paper used a hypothesis-testing research approach to gather data from the annual reports of 13 industrial companies listed on Palestine Exchange and 25 Jordanian companies listed on Amman Stock Exchange from 2013 to 2020. Descriptive and inferential statistics were employed, along with correlation analysis to evaluate linear relationships between variables. The fixed and random effect regressions were utilized to develop the research model. In the case of Palestinian manufacturing firms, the results revealed that Earnings Management (EM) had a significant negative impact on debt level. According to the moderating role of Corporate Governance (CG), larger boards and the existence of female members on the board of directors causes an increase in the high-leverage impact of EM, whereas CEO duality mitigates the high-leverage impact. However, in the case of Jordanian manufacturing firms, EM showed an insignificant impact on debt level. Regarding the moderating role of CG, it was proved that the presence of female members on the board of directors increased the firm’s reliance on debt financing as a result of EM practices, while institutional investors mitigate the effect of EM on debt financing, leading to a decrease in reliance on debt. The findings of this research are suitable for the regulators while formulating policies on the Corporate Governance and the Impact of Earnings Management on Capital Structure. These findings have guided the policymakers that they should enhance their focus on Palestine and Jordan companies to test Corporate Governance Moderates the Impact of Earnings Management on Capital Structure. This study is also helpful for the new researcher while investigating this area in the future.

The Impact of Disclosing Sustainability on the Value Added from the Stakeholders’ Perspective of Industrial Companies Listed on the Amman Stock Exchange

The Impact of Disclosing Sustainability on the Value Added from the Stakeholders’ Perspective of Industrial Companies Listed on the Amman Stock Exchange

The Impact of Operating Cash Flow on Corporate Profitability: Amman Stock Exchange case study

The problem of the study is the challenges faced by the growth of different sectors, which requires the identification of an appropriate operating cash flow policy to increase corporate Profitability. Unbalanced policies followed in operating cash flows can negatively affect companies' Profitability. The study's objective is to investigate the impact of operating cash flow on the Profitability of companies in different sectors listed on the Oman Stock Exchange. For five years (2017–2021) for 71 companies. In these sectors, Profitability and metrics have been used carefully. To show how these elements affect the success of each of these sectors? It is because investors can use this information to make sound investment decisions using different operating cash flow methods to evaluate company profitability. The researchers created a checklist to test the research hypothesis, in which each operating cash flow (OCF) was used as an independent variable. (Return on Assets (ROA) and Return on Equity (ROE)) was determined as the type of firm Profitability, which is the dependent variable. The results are shown through two models. Data using descriptive statistical analysis. Regression Approaches Using EViews 12, Given that the data included both time series and cross-sectional characteristics, fixed least squares (PLS) regression effects models were used to estimate the study models. The results reveal that operating cash flow has an impact of 57.9% on ROA, a measure of corporate Profitability, and other variables have an impact of 42.1% that is not mentioned. Meanwhile, the independent variable affects ROE by 57.7% and other variables by 42.3%. Paper type: Research paper.

Analyzing the Impact of Real and Accrual Earnings Management on the Cost of Equity: Evidence from the Jordanian Amman Stock Exchange

Analyzing the Impact of Real and Accrual Earnings Management on the Cost of Equity: Evidence from the Jordanian Amman Stock Exchange

Risk Modeling, Return Forecasting, and Optimal Portfolio Selection

The main objective of this research is to form an optimal investment portfolio consisting of a number of stocks selected according to specific criteria in Amman Stock Exchange and to test the ability of a various economic models to predict the performance of this portfolio in the foreseeable future. A time series for the return of the selected portfolio and for the return of a market index are formed. A set of tests were conducted to reach a stationary time series return and, then, to follow the Box-Jenkins methodology in order to build predictive models (ARMA) and to examine the residuals of models and to model them using ARCH and GARCH models to reach the best prediction of the performance of the portfolio and the market index in the forecasted periods. The data were tracked on a daily basis for the study sample and the market index simultaneously for a period of three years. Twenty-one companies were selected in the investment portfolio distributed among several sectors. The study concluded that the formed portfolio achieved a good diversification and gave a high return in relation to the lowest possible risk according to the Sharpe scale. Also, it is concluded that the model ARMA (1,1) is the most suitable for estimating market portfolio returns and forecasting risks for the market index return, and ARMA (2,1) and the model ARMA - GARCH are the most capable one of achieving good results that can be relied upon in tracking the performance of the studied investment portfolio.

The Impact of The Computerized Accounting Information System in Reducing Financial Risks in Jordanian Commercial Banks

Purpose: The purpose of this study was to assess the impact of computerized accounting information systems (CAIS) on reducing financial risks within Jordanian commercial banks listed on the Amman Stock Exchange. This involved examining the components, characteristics, and benefits of CAIS in this context. Methods: The study employed a questionnaire-based approach to gather information, distributing 75 questionnaires among financial managers and internal auditors within Jordanian commercial banks. A total of 64 questionnaires were retrieved and analyzed to draw conclusions. Results and Discussion: The analysis revealed a significant impact of various variables related to computerized information systems in mitigating financial risks within the sampled banks. This finding underscores the importance of CAIS in enhancing risk management practices within the banking sector. Notably, the study highlights the necessity of corporate governance implementation and the preparation of specialized reports to enhance financial risk disclosure processes. Implications of the Research: The findings of this research have several implications for both academia and practice. Firstly, they emphasize the crucial role of CAIS in reducing financial risks within commercial banks. Secondly, they underscore the importance of implementing robust corporate governance mechanisms to strengthen risk management frameworks. Additionally, the study suggests the need for further research to explore the impact of accounting information systems on different types of risks and their consequent effects on financial performance. Originality/Value: This study contributes to the existing literature by providing insights into the specific context of Jordanian commercial banks and their utilization of CAIS for managing financial risks. By identifying the components, characteristics, and benefits of CAIS in this setting, the research adds valuable knowledge to the field of accounting and finance. Moreover, its recommendations for enhanced corporate governance practices and specialized reporting can inform practical strategies for risk management in banking institutions.

Navigating Ethics: Insights into External Auditor Compliance from Financial Managers and Internal Auditors in Jordanian Companies

This study aims to assess to what extent Jordanian external auditors comply with the Code of Ethics for Professional Accountants, as perceived by financial managers and internal auditors. The hypotheses are tested using one sample and an independent sample t-test for a sample of 53 industrial public shareholding companies listed on the Amman stock exchange during 2020–2023. The study utilized the survey instruments to collect the necessary data from 200 participants. The findings show that the external auditor complies with the code of professional ethics at a high to moderate level per the Relative Important Index from the viewpoint of both financial managers and internal auditors. Moreover, the outcomes also show there are no significant variances between their beliefs regarding the adherence of external auditors to the code of ethics. The study consequences indicate that the enacted regulations that organize the work of the auditors can effectively enhance the compliance of Jordanian auditors with the code of professional ethics. Nevertheless, it emphasized the need for more shared efforts for more compliance with professional ethics in the auditing profession. The study suggests Many recommendations to enhance auditors’ compliance such as continuous oversight of auditor compliance from the Jordanian Association of Certified Public Accountants, ethical awareness, research and development in the area of ethics, and training programs to explain ethical complexities. This study assures the importance of enhancing ethical compliance in the auditing profession in an emerging country to increase public trust, attract investment, and improve financial statements integrity.

Evaluating the Level of Disclosure in Interim Financial Reports in Accordance with IAS (34)-A Comparative Applied Study of a Sample of Banks Registered in The Iraq Stock Exchange and The Amman Stock Exchange

Evaluating the Level of Disclosure in Interim Financial Reports in Accordance with IAS (34)-A Comparative Applied Study of a Sample of Banks Registered in The Iraq Stock Exchange and The Amman Stock Exchange

How Audit Fees Impact Earnings Management in Service Companies on the Amman Stock Exchange through Audit Committee Characteristics

The primary objective of this research was to investigate the potential moderating role of audit fees in the relationship between audit committee characteristics and earnings management. Specifically, this study aimed to establish connections between audit committee features, such as committee size, member independence, and financial expertise, and the practice of earnings management. To address these research questions, a convenient sample of 46 service providers listed on the Amman Stock Exchange between 2016 and the subsequent year was employed. Descriptive statistical methods were applied to characterize the variables under investigation, while a multiple regression model was utilized to assess the study’s hypotheses. The findings of the study revealed that there was no significant correlation between the size of the audit committee and earnings management. However, a negative correlation was observed between the audit committee’s independence and the financial expertise of its members. Importantly, when audit fees were introduced as a moderating variable, the relationships between committee member independence and earnings management, as well as between committee member financial expertise and earnings management, were found to be weakened. These results have potential implications for policymakers and regulators in Jordan. They may offer valuable insights into corporate governance reforms that could assist Jordanian businesses in enhancing their earnings management practices.