IDEAS home Printed from https://ideas.repec.org/h/spr/prbchp/978-3-031-23844-4_1.html
   My bibliography  Save this book chapter

The Relationship Between Profitability and Market Value: Evidence from Jordanian Banks

In: New Perspectives and Paradigms in Applied Economics and Business

Author

Listed:
  • Mohammad Fawzi Shubita

    (Amman Arab University)

Abstract

The purpose of this study is to examine the relationship between profitability and the market value of the bank, and the relation between high and low profitability with market value using the bank size measured by total assets as a control variable. The study sample is the Jordanian banks listed on Amman Stock Exchange for the period from 2010 to 2020. ROE measures the return per equity invested by the owner, and it is important to know how well management is deployed the bank's equity in the pursuit of earnings. The bank market value is measured using the market-to-book value ratio. The study methods are to use the main model and benchmark model with panel and pooled OLS regression and random effect models approach with several econometrics tools like Husman test, variance inflation factor, and panel granger causality. The study's main results are that the high-profit banks have a higher market value than low-profit banks, there is a relationship between high and low ROE and market value, there is a relationship between earnings and market value, and the bank size affects the relationship between ROE and market value. About the last result, the Adj R2 for small banks is 26.2%, which is higher than the full sample (16.9%) and large banks (14.1%). As a conclusion, the study recommends the creditors and investors benefit from the study results by concentrating more on the company's financial results before making the investment decision.

Suggested Citation

  • Mohammad Fawzi Shubita, 2023. "The Relationship Between Profitability and Market Value: Evidence from Jordanian Banks," Springer Proceedings in Business and Economics, in: William C. Gartner (ed.), New Perspectives and Paradigms in Applied Economics and Business, pages 3-16, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-23844-4_1
    DOI: 10.1007/978-3-031-23844-4_1
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Keywords

    Profitability; Fair value; Banks size; Emerging market; Jordan;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:prbchp:978-3-031-23844-4_1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.