The Effect of Ffinancial Lleverage through Debt Ratio and Equity Ratio on ROE In Jordanian’s Banking Sector (Review Completed - Accepted)
Banks total funding costs will increase accordingly if their equity ratio is increased, higher equity ratio makes a bank’s debt more safe and lowers the required return on debt. Taking these into account the Modigliani-Miller implied that a bank’s total cost of funding should not be affected by the bank’s equity ratio.
This study is conducted to investigate the effect of financial leverage through debt ratio and equity ratio on return on equity (ROE). For the analysis the simple liner regression cover a period 2008-2011, used to examine the extent that the financial leverage effect ROE among Jordanian Banking sector. The study found that the Jordan Islamic Bank has the highest debt ratio, and the Capital Bank of Jordan has the lowest Debt ratio, and Capital Bank of Jordan has the highest equity ratio, and the Jordan Islamic Bank has the lowest equity ratio, also the Capital Bank of Jordan has the highest ROE, and the Jordan Kuwait Bank has the lowest ROE.
The study revealed that there is significant effect of debt ratio on dependent variable return on equity (ROE), and there is significant effect of equity ratio on dependent variable return on equity (ROE), and there is significant effect of independent variable financial leverage through debt ratio and equity ratio on dependent variable return on equity (ROE) among Jordanian Banking sector.
Keywords: Amman Stock Exchange (ASE), Debt Ratio, Equity Ratio, ROE
Sector-wise Effect of Solvency on Profitability: Evidence from Jordanian Context (Review Completed - Accepted)
This study is conducted to investigate the effect of solvency on profitability among Jordanian Industrial sectors. As far as this study is concerned solvency which expressed by debt ratio (DEBT), and equity ratio (EQUITY), and the profitability which expressed by variables including earnings before interest and tax (EBIT), net profit margin (NPM), return on asset (ROA), and return on equity (ROE), and. For the analysis the multiple regressions cover a period 2008-2011, used to examine the effect of solvency on profitability among sectors. The study found that table the Mining and Extraction sector has the highest earnings before interest and tax (EBIT) while the lowest the Glass and Ceramic Industries. The Mining and Extraction sector has the highest Net Profit Margin (NPM), return on asset (ROA); return on equity (ROE) while the lowest the Glass and Ceramic Industries. Also table the Electrical Industries sector has the highest debit ratio (DEBT) while the lowest the Glass and Ceramic Industries. But The Glass and Ceramic Industries have the highest equity ratio (EQUITY) and the lowest equity ratio (EQUITY) for the Electrical Industries sector.
The study revealed that solvency has a significant relationship with earnings before interest and tax (EBIT), net profit margin (NPM), return on asset (ROA), and return on equity (ROE), because the test was at level 5%.
Keywords: Amman Stock Exchange (ASE), Debt Ratio, Earning before Interest and Tax, Equity Ratio, Net Profit Margin, Profitability, Return on Asset, Return on Equity, Solvency