Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Abstract

Risks and Bank Performance in Jordan

Author(s): Marwan Hasan Altarawneh, Rohami Shafie

The purpose of the paper is to investigate the impact of operational risk, credit risk, and liquidity risk on bank performance in Jordan. The study utilizes a sample of 15 listed banks in the Amman Stock Exchange (ASE) and the period of study is confined between 2010 and 2014. The dependent variable of the study is bank performance based on Return on Assets (ROA), while risks’ variables are operational risk, credit risk, and liquidity risk. The results show that operational and credit risks have a significant negative relationship with ROA while liquidity risk is found to have an insignificant positive relationship with ROA. Also, the study discovers that the relationship between firm size and ROA is negatively significant while the relationship between bank age and ROA is found to be positively significant. Finally, the result of the relationship between management change and ROA is positively insignificant. In addition, the results are important to the practitioners by showing the factors that affect bank performance and enables them to improve their risk management practice. Besides, it also provides valuable information as well as guidance for banking institutions to improve their performance in the future.