Jordanian Banking Sector Research Articles

Supply chain integration, organizational performance and balanced scorecard: An empirical study of the banking sector in Jordan

This paper examines the impact of supply chain integration on organizational performance in Jordanian banking sector. Supply chain integration is divided into two categories: customer and internal integration. Organizational performance comprises of the following perspectives: customers, internal processes, organizational capacity and stewardship. The results demonstrate that supply chain integration is significantly related to organizational performance. Evidence of the improved organisational performance is also provided in the feedback from some of the surveyed banks. Internal integration impacts all four organizational performance dimensions; however, customer integration has impact only on customer perspective. The results suggest that improved customer involvement could help develop the banks' performance. Primary data was collected by using a questionnaire at Jordanian banks. The research model was tested using data from the sample (n=112) of nine banks in Jordan. The data was analysed by means of exploratory factor analysis. The results of the multiple regression analysis show that supply chain integration effects significantly organizational performance

The effect of sustainability accounting disclosures on financial performance: an empirical study on the Jordanian banking sector

This study aims to examine the effect of sustainability accounting disclosure on the financial performance of banks operating in Jordan during the period of 2013–2017. The study focused on the effect of economic, environmental and social disclosures on financial performance. To achieve the study objective, the content analysis method was used. The dimensions of sustainability accounting disclosure were measured through indicators that have been developed for this purpose, which are in accordance with Global Reporting Initiative (GRI) (G4-2013). The study results revealed that there is a statistically significant effect of sustainability accounting disclosure on the financial performance. In addition, the study results revealed that the disclosure of the economic and social dimensions had a positive effect on return on equity (ROE). While the environmental dimension did not affect the return on equity (ROE). In addition, the results of the study revealed that the disclosure of sustainability dimensions (economic, social and environment) had a combined effect on the return on assets (ROA). This means that the banks operating in Jordan give more priority to the economic dimension disclosure, than to the social and environmental dimensions.In reviewing previous studies in the accounting literature, it has been found that there is a paucity of studies that examine the concept of sustainability accounting, especially in the Jordanian banking sector. Therefore, this study constitutes value to this field.

The Impact of Supply Chain Integration and Internal Control on Financial Performance in the Jordanian Banking Sector

The aim of this paper is to use a recently developed framework of supply chain integration (SCI) to examine the influence of a set of relationships between SCI and internal control on financial performance in the Jordanian banking sector. SCI consists of external integration and internal integration. External integration includes customer integration and supplier integration. This study utilizes survey data from 249 employees in the Jordanian banking sector and tests the research framework and hypotheses using exploratory factor analysis. The impact of supply chain internal and external integration and internal control significantly affected financial performance. The impact of the examined factors on financial performance is as follows, in decreasing order: internal integration, supplier integration, customer integration, and internal control. This study’s contribution to supply chain management is in its integration of SCI and internal control variables to propose a practical framework for the banks to use, and its development of a measurement tool for managers to determine the effects of internal and external integration and internal control on financial performance.

The Service Quality Dimensions that Affect Customer Satisfaction in the Jordanian Banking Sector

Banks must meet the needs of their customers in order to achieve sustainable development. The aim of this paper is to examine service quality dimensions, by using the modified SERVQUAL model, which can be used to measure customer satisfaction, and the effect of these dimensions (tangibles, responsiveness, empathy, assurance, reliability, access, financial aspect, and employee competences) on customer satisfaction in Jordanian banks. Data were gathered from 825 customers in the Jordanian banking sector. The sample data were statistically analyzed through exploratory factor analysis by the SPSS program to determine service quality perception and customer satisfaction. The results illustrate that the modified SERVQUAL Model extracted four subscales in the new model instead of eight in the initial model. The first subscale contains four dimensions—assurance, reliability, access and employee competences. The second subscale consists of two dimensions—responsiveness and empathy. The third and fourth subscales—financial aspect and tangibility—are separate factors. Further studies should consider the dimensions of access, financial aspect, and employee competences as essential parts of service quality dimensions with the other subscales, so as to improve wider customer satisfaction in the banking sector. In the authors’ opinion, the modified SERVQUAL model is useful for addressing customer satisfaction in the banking sector.

Credit risk management and business intelligence approach of the banking sector in Jordan

Banking segment is one of the ultimate key segments that support the sustainable economic progress in Jordan. Hence, banks in Jordan are considered as tremendously significant financial establishme...

Bank loan-loss accounts, income smoothing, capital management, signaling and procyclicality

Purpose The purpose of this paper is to investigate if Jordanian banks using provision accounts as a technique to smooth income, manage capital ratio, signal future earning and test other determinants affecting provision accounts. Design/methodology/approach The study was conducted on all Jordanian listed banks, and it covers the period 2005-2014. Different models are applied to test the dependent variables (loan loss provision [LLP] accounts) and its effects on different explanatory variables by using several statistical techniques (e.g. multiple regression). Findings The results show that there is no conclusive evidence supports that Jordanian banks used provision to smooth income, manage capital ratio or engage in pro-cyclical behavior. However, a positive and significant effect between one year ahead change in earnings and loan loss allowance, indicating that banks may use provisions to signal future positive changes in earnings. In addition, the results show that loan-to-asset ratio and beginning loan loss allowance have positive effect on provision accounts. Practical implications The results of this study are useful in assisting the regulators (e.g. US Securities and Exchange Commission, central bank) in efforts toward improving the quality of the reported financial reporting in the banking industry and focus on LLP management motivations. This study gives shareholders further insight which enables them to better understand the actions of managers and thus increase their control over their investments. Additionally, auditors should be aware of different incentives for using LLP as a tool of earnings management to be able to detect eventual manipulation of accounting earnings. Originality/value Banking in is one of the most stringently regulated of sectors and, furthermore, has a major impact on other sectors and on economic growth in general. In view of such importance, this study focuses on the banking industry and contributes to the literature in several ways. First, it represents the first known study, to the best of author knowledge, which examines if Jordanian banks use LLP accounts as a tool to smooth income and/or to manage capital. Second, unlike most existing research, which usually studies one aspect of LLP, this study focuses on four main motivations influencing provision accounts in the banks of Jordan. Third, additional tests were carried out to check the robustness of results, for example, sensitivity analysis is used to examine the change of findings by repeating of tests after using different proxies. Fourth, as a difference from other studies, this study investigates the effects of global financial crisis of 2008 on income smoothing behavior of Jordanian banking sector. Fifth, this paper provides a timely contribution to the continuous debate of the effect of LLP on earnings management in a poorly exploited setting, emerging market context.

The Impact of Talent Management Strategies on Bank Performance in Jordanian Commercial Banks

Talent management is very significant to the survive of firms in highly competitive business environment today. it refers to the application of needed employees for a firm and the programs to fit those needs and it combines employee knowledge, skills, attitude, values, competencies and work preferences. The explosive growth of Jordanian banking sector has led to an urgent need to develop talent management strategies as a means of boosting bank performance. The purpose of this study was to investigate the impact of talent management strategies on bank performance in Jordanian commercial banks. The design of the study has quantitative approach. Primary data was obtained by questionnaire instrument. The respondents in this study were line managers and HR managers in head admistrations. The number of population was 120 respondents. Random sampling was used in the study. 101completed questionnaires were analyzed as a final sample. Three hypotheses have been developed through literature review and tested using descriptive analysis and independent t-sample test performed by SPSS. The results indicate a positive association of attracting, developing and retaining talents with bank performance. bank management is advised to keep developing the attracting mechanism they have applied in order to cope with the changes in the business environment and stay competitive. Also, its advised to maintain developing the motivation system according to the labor market conditions and competitivnes in order to retain talented staff and to avoid labor turnover. As it should concentrate on the rewards mechanizim as a main key to retain talents. future studies recruiting larger sample sizes are needed. Furthermore, prospective studies should effectively compare Jordanian bank performance with other banks in the Middle East based on these variables.

The Capital Assets Pricing Model & Arbitrage Pricing Theory: Properties and Applications in Jordan

This paper aimed to test the validity of capital asset pricing model (CAPM) and arbitrage pricing theory (APT) in Jordanian stock Market using three different firms of three main sectors, financial, industrial, and service sector for the period Q1 (2000) to Q4 (2016), using published information obtained from Amman stock exchange (ASE), these models were designed to measure the cost of capital using the coefficient of systematic risk factor, that used in the valuation of capital assets. We reviewed the most important similarities and differences between the two models out of sectors analysis. The study showed, first, there are some differences between the two models in term of the amount of systematic risk that can be eliminated by diversification in the three sectors. Second, the application of APT model showed that large percentage of risk can be eliminated by diversification more than CAPM model. Third, the banking sector in Jordan faces more systematic risks than other sectors.

The Impact of the Binomial Option Pricing Model on Designing Hedge Portfolio. Empirical Study on Banking Sector in Amman Stock Exchange

The current study investigates the way of using option pricing according to the Binomial Option Pricing Model (BOPM), and how to design a hedge portfolio for the Jordanian banks in Amman Stock Exchange (ASE) in the years 2015-2016. To Achieve aims of the study, the researcher used Microsoft Office Excel 2007 in order to set pricing, fair value of shares and design hedge portfolio. The study reveals that the BOPM is one of the most significant models for option pricing as appeared in the results of the banking sector in the ASE. The findings also affirm that designing hedge portfolios reduces risks that might occur to non-hedging portfolios; hedge portfolio fulfilled positive results. It expected that shareholders and financial managers working in the Jordanian banking sector gain benefits from this study by providing a way to design hedge portfolio, how to price options using the BOMP and, accordingly, how to reduce the financial risks of the portfolios. The study is considered important as it was implemented for the first time on the banking sector in the ASE which includes varied investment instruments that need awareness and knowledge by the financial managers in the Jordanian banks.

The Role of Corporate Social Responsibility in Enhancing Firm Performance from the Perspective of IT Employees in Jordanian Banking Sector: The Mediating Effect of Transformational Leadership

Direct relationship between Corporate Social Responsibility (CSR) and firm performance has been extensively studied by scholars in several majors. The direct examination of this relationship seems to be relatively imprecise since many other variables have indirect influence on this relationship. Therefore, this study takes into considerations Transformational Leadership (TFL) as a probable mediator in the role CSR plays to enhance the firm performanceamong Information Technology (IT) employees in banking sector. Data were collected from IT employees within IT departments from 25 banks in Jordan through a questionnaire survey. 354 valid questionnaires were returned and analyzed using different quantitative techniques. This research finds that CSR has a significant influence on firm performance and three of its dimensions, namely, economic responsibility, ethical responsibility, and discretionary responsibility have a significant effect on firm performance, whereas legal responsibility has no remarkable effect. It also finds that CSR has a positive influence on TFL. Specifically, discretionary responsibility has a significant effect on TFL, whereas other dimensions have no significant contribution to TFL. As well as, it finds that TFL has a positive contribution to the firm performance. Inspirational motivation and individualized consideration have the only remarkable contribution to the firm performance. Finally, it has been revealed that TFL partially mediates the relationship between CSR and firm performance.

The Effect of Employee Engagement on Organizational Performance Via the Mediating Role of Job Satisfaction: The Case of IT Employees in Jordanian Banking Sector

This study sought to investigate the effect of IT employees' engagement on organizational performance through the mediating role of job satisfaction for IT employees within the IT Departments in Jordanian banking sector. Quantitative research design and regression analysis were applied on a total of 429 valid returns that were obtained in a questionnaire based survey. The results showed that IT employee engagement significantly affected organizational performance and three of its dimensions, vigor, absorption, and dedication contributed significantly to organizational performance. The results also showed that IT employee engagement positively and significantly affected job satisfaction, where vigor had the most contribution. In addition, it was found that job satisfaction significantly and positively affected organizational performance. Furthermore, job satisfaction only partially mediated the association between IT employee engagement and organizational performance. This study implies that IT departments in Jordanian banking should try their best to promote and facilitate IT employees' engagement and satisfaction in an effort to improve their performance, which will eventually yield positive results for the bank as a whole. In light of these results, the research presented many recommendations for future research, the most important ones were the application of this study in other sectors, cultures, and countries, the exploration of the moderating role of job satisfaction instead of mediating role, and the use of other sampling techniques.

The mediating effect of job satisfaction on the relationship between organizational culture and knowledge management in Jordanian banking sector

PurposeThe purpose of this paper is to examine the positive effect of organizational culture on knowledge management (KM) by clarifying the mediating effect of job satisfaction on the banking sector in Jordan. The study was conducted on Jordanian banks to develop the organizational culture concept to be reflected in the bank activities. The population of this study consists of junior and senior customer service and administrative employees working at Jordanian banks in Jordan.Design/methodology/approachThe sample of this research is purposive one because the research cannot get a list containing names of customer service employees for privacy reasons. Various statistical tests were employed to test the research hypotheses. The study utilized two statistical packages – Statistical Package for Social Sciences (SPSS) and SPSS-AMOS – for analyzing the data.FindingsThe development of organizational culture at banks in Jordan is still not stable and efficient. This may be affected by the management style and teamwork spirit in Jordan and other factors related to bank culture and how it will be reflected in customer service. The creation and application of KM at banks in Jordan is still modest. Knowledge is mainly shared internally within the bank with little efforts dedicated to soliciting knowledge from the external environment including customers. The job satisfaction at banks in Jordan is still modest.Originality/valueThe purpose of this study is to investigate how the organizational culture can improve job satisfaction for efficient work knowledge. The relationship between organizational culture and KM of organizational members is developed and analyzed herein by proposing a mediating role of job satisfaction. Few research papers have focused on job satisfaction and its mechanism contributing to individual effectiveness in the Jordanian market, and many ignored the benefits of KM and value of culture in many sectors.

ERP implementation in banks: success factors & impact on financial performance

The study aims to measure the extent of implementing ERP systems in the banking sector in Jordan, and identify the main factors that influence the implementation decision, in addition to measure the impact of the post-implementation of the ERP system on the financial performance. The study utilized a content analysis as a research instrument. The study of population consisted of all the banks in Jordan, where the study applied ‘Purposive Sample’ type. Therefore, the study included 11 banks from 2011 to 2016.The study indicated that the implementation year of the ERP system started in most of the Jordanian banks in 2013, and the rates vary from bank to bank according to their importance and the level of awareness. Training courses are considered the main variable that these banks face in the process of implementation. In addition, awareness of the advantages, the cost, and supporting the infrastructure are the core factors needed to influence the implementation decision.There is no impact when implementing an ERP system on the financial performance of the Jordanian banks in regard to the ROI and the DPS; on the other hand, there is an impact of the ERP system on the overall performance of the banks.The study recommends to disseminate knowledge on the advantages of implementing of ERP system in Jordanian banks and to develop the IT department efficiency. Moreover, it will be worthwhile to examine the effect of ERP systems by utilizing financial and non-financial measurements.

Ownership Structure And Conservatism's Impact On Jordanian Bank's Financial Performance

The banking sector has suffered recently from a series of financial crises that have affected the worlds' financial system's stability. It is argued that the weak financial performance of banks could be due, among other factors, to deficiencies within corporate governance systems in banks, and the lack of conservatism (as conservatism is used to minimize the agency problem). This paper aims to examine the effect of the corporate governance mechanism (ownership structure, bank's characteristics) and conservatism level on the Jordanian commercial banks' performance for the period between 2005-2014. Four ownership structure dimensions are employed-ownership concentration, institutional ownership, foreign ownership and government ownership. Bank characteristics are captured by using size, age and debt-to-equity ratio. The paper used return on assets and return on equity to assess the financial performance, and applied the accrual method and book value-to-market value method as proxies for conservatism. The results showed a significant impact for all of the ownership structure dimensions and bank's characteristics, on the bank's performance, except for the institutional ownership and the banks' age, which showed no impact on performance. The explanation of this exception is that the Jordanian banking sector is essentially built upon family business. The foreign ownership and government ownership have a positive relationship with bank performance, as the high level of foreign ownership indicates high quality investments. Additionally, government ownership usually imposes more controls and minimizes the agency problems. On the other hand, the concentrated ownership and the bank's size showed a negative relationship to the banks' performance, as concentrated investors may abuse their authority. The negative relationship to the banks' size is due to the high cost required from these banks to control and monitor their different branches. In addition, the results suggest a negative impact of conservatism on the bank's performance when utilizing the book value method as the balance sheet accounts are understated, and hidden reserves are created. On the other hand, a positive impact of conservatism on the bank's performance is detected when utilizing the accrual method. This is because conservatism's policy will improve firm's performance by minimizing the investment in the negative net present value projects. Thus, two different methods could have different results as every method adopts a different perspective.

The impact of transformational leadership on employees’ creativity

PurposeThe purpose of this paper is to examine the effect of transformational leadership on employees’ creativity in the Jordanian banking sector through the mediating effect of perceived organizational support.Design/methodology/approachThe study is based on survey data collected from 369 employees working in Jordanian banks. Validity and reliability analyses were performed, and direct and indirect effects were tested using structural equation modeling.FindingsThe results indicate that transformational leadership positively affects some dimensions of employees’ creativity and perceived organizational support. However, perceived organizational support is found to not be significantly related to some dimensions of employees’ creativity. Additionally, the mediating effect of perceived organizational support on the relationship between transformational leadership and some dimensions of employees’ creativity is found to not be significant.Originality/valueThis paper is one of the first to examine the relationship between transformational leadership and employees’ creativity through perceived organizational support, especially in an Arab country and in the banking sector.

Does banking sector performance promote economic growth? Case study of Jordanian commercial banks

Spurred by the need to evade possible parameter bias associated with earlier works, this study intended to address the subject of whether performance of commercial banking contributes to economic growth. With the aim of answering this question, the present review concentrates on analyzing the association between profitability, deposit and credit facilities as proxy for performance of commercial banks while gross domestic product proxies economic growth. The population of the study is characterized by the Jordanian banking industry; the study enclosed a period of six years from 2010 to 2015 constructed on the annual report of thirteen chosen banks. Using Ordinary Least Square, the regression outcomes found a significant positive association between measures of bank performance and economic growth. Findings demonstrate that measures of bank performance in particular profitability deposits credits have positive relationship with economic growth as measured by GDP. The empirical results suggest that the policy creators should make arrangements to augment and prompt the banking sector in Jordan on account of its key significance in making and advancing development of the economy. It additionally can be inferred that not only commercial banking performance but also other movables such as political stability and technology may assume essential part in the economic prosperity in Jordan.

The Impact of Human Resources Auditing on the Application of Governance in the Banking Sector in Jordan

The purpose of this study was to investigate and measure the impact of Human Resources Auditing on the Application of Governance in the Banking Sector in Jordan, where the study population consisted of (26) banks operating in Jordan.The study consisted of (250) people working at banks headquarters, and in auditing and human resources directorates, holding managers, chief section and employee positions.Researcher suggested an action plan to carry out human auditing activities in accordance with auditing criteria and international governance principles and with Jordanian business environment as an attempt to clarify and highlight the mechanism of human resources auditing work and raise the awareness of this concept as well as to urge the start of its application effectively and basically within current auditing practices.Results showed that human resources auditing has an effect on governance application in Jordanian banking sector, along with clear positive relationship and a healthy indicator among requirements of human resources auditing and governance applications including the inclusion of human resources auditing as a principle requirement in the application of governance in Jordanian Banking Sector as well as to be contained Central Bank of Jordan laws and legislationsKeywords: Human Resources Auditing, Application of Governance, Banking Sector in Jordan.

The Role of the Jordanian Banking Sector in Economic Development

The aim of this study is to investigate the impact of the Jordanian banking sector on economic development that was measured by the Gross Domestic Product (GDP). It aims to identify the role of the Jordanian banking sector in the support of economic development through the study of the size of the credit facilities offered by banks.The study relied on descriptive and analytic method, as well as on field study. The population of this study represents the working banks in Jordan, which offers various banking services to the customers. The tool of the study include data of credit facilities, banking deposits for Jordanian banking sector, and gross domestic product that were collected from the annual financial status of Jordanian Central Bank for the period (2000- 2015).The study found that there is a significant statistical impact of the factors (the deposits of the banking sector, Credit facilities) on Gross Domestic Product (GDP). The study rejected the null hypothesis and accepted the alternative hypothesis for the two hypotheses. Also, the study recommended that the Jordanian banking sector should expand in the granting of credit facilities to all economic sectors.

Determinants of Non-Performing Loans: Evidence from the Jordanian Banking Sector

Determinants of Non-Performing Loans: Evidence from the Jordanian Banking Sector

The role of external auditing in activating the governance for controlling banking risk

This study was done to investigate the role of external auditing in activating the governance for controlling banking risk. The study was mainly focused on Jordanian banking sector. Data for this study was collected using structured and non-structured questionnaires. The questionnaires were distributed randomly to internal auditors in different banks in Jordan. To ensure that accurate result was achieved, hypotheses testing was done using sample-t-test where alternative hypotheses were accepted and null hypotheses rejected. The most valid result that was obtained in this study was that external auditing was the main tool that is able to activate the governance of banking risk. The result showed that with the existence of external auditors, the management of a bank has to be very vigilant to ensure that there are no financial risks affecting banking sector of Jordan. Most vital recommendation determined by the researcher was to ensure that the banking sector of Jordan keeps proper financial records in order to mitigate the extent of financial risk. It is also recommended for all financial institutions in Jordan to adopt the use of accounting information technology to improve accounting functions of the banks. In this research study, 11 different banks were investigated to provide actual evidence of the roles external auditing play in activating governance to mitigate financial risk. 70% of the banks showed that external audit activate the management governance while only 30% of the Jordan banks denied that fact. The aim of this research was to determine the roles played by external audit to manage risk. The main focus was on banking sector of Jordan. In this analysis, were able to determine different risks which affects banking sector of Jordan. Finally, the banking sector of Jordan must adopt international accounting standards such as transparency, accountability, integrity and objectivity when preparing financial statements.