Factors Affecting the Banks Profitability in Jordan between 2015 and 2020

Abstract

This study aimed to examine the internal and external factors affecting commercial banks’ profitability. The internal factors comprised in the independent variables are: asset quality, capital adequacy, management quality, liquidity, bank age, and bank size. On the other hand, the external factors include GDP growth, inflation, and interest rate. The dependent variable is the commercial banks’ profitability measured by Return on Assets (ROA). The researcher used the descriptive-analytical approach. The study population consisted of all the commercial banks listed on the Amman Stock Exchange (ASE) which amount to (13) banks, and the sample included all the population's elements. Financial data were collected from the financial statements of commercial banks listed on the ASE (20152020) to measure several internal and external factors affecting profitability. The data were processed using the Statistical Package for Social Sciences (SPSS) version 22. This study concluded that the internal factors have a clear impact on the profitability of commercial banks and that GDP growth is one of the external factors that affect profitability. The remaining variables that have been studied (i.e., the bank age, liquidity, bank size, inflation, and the interest rate) do not affect the profitability of commercial banks.