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The Impact of Sustainability on the Financial Performance of Jordanian Islamic Banks

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  • Ali Abdelfattah Hamdan Zyadat

Abstract

The study looked into the effect of the three dimensions of sustainability (economic dimension, environmental dimension, and social dimension) on the financial performance of Jordanian Islamic banks represented by (return on assets, return on equity, and earnings per share) during the period (2008-2014). The study sample contained two main Islamic banks in Jordan, namely: Jordan Islamic Bank and Arab Islamic Bank. Required data was collected from the annual reports, financial statements, sustainability reports, and social responsibility reports of the Jordanian Islamic banks from (2008-2014). Items for the dimensions of sustainability were determined, and their level of exercise was measured, by analyzing the content of these reports (content analysis), as well as the financial indicators of financial performance, which have been extracted from the financial statements of the surveyed banks. The study results have shown the presence of a statistically significant effect of the dimensions of sustainability on the financial performance measured by ROA and EPS in the Jordanian Islamic banks. However, there was no statistically significant effect of the dimensions of sustainability on the financial performance as measured by ROE in those banks. Finally, the study has encouraged Islamic banks to adopt a rational and prudent investment and financial policies, make proper operational decisions to generate revenue, maximize profits, and achieve shareholder objectives, issue sustainability reports to discover if goals and activities are compatible to the goals and interests of society and the environment, and increase their interest in sustainability.

Suggested Citation

  • Ali Abdelfattah Hamdan Zyadat, 2017. "The Impact of Sustainability on the Financial Performance of Jordanian Islamic Banks," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(1), pages 55-63, January.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:1:p:55-63
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    References listed on IDEAS

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    1. Stefan Schaltegger & Marcus Wagner, 2006. "Integrative management of sustainability performance, measurement and reporting," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 3(1), pages 1-19.
    2. Nadia Albu & Cătălin Nicolae Albu & Maria Mădălina Gîrbină & Maria Iuliana Sandu, 2011. "The Implications of Corporate Social Responsibility on the Accounting Profession: The Case of Romania," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 13(29), pages 221-234, February.
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    Cited by:

    1. Carmen GHELASE & Mihaela NECULITA & Arabela ICHIM, 2023. "The Impact of Sustainable Policy on Financial Performance in the Romanian Banking System," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 157-165.

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    More about this item

    Keywords

    sustainability; environmental dimension; economic dimension; social dimension; financial performance; Earnings per Share (EPS); Rate of Return on Equity (ROE); Return on Assets (ROA); Islamic banks;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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