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2017 Publications

International Business and Management
Vol. 15, No. 2, 2017, pp. 46-54

Off-Balance Items and Their Impact on the Financial Performance Standards of
the Banks: An Empirical Study on the Commercial Banks of Jordan

Hanan Al-Awawdeh, Saad Al-Sakini

The purpose of this study is to test the effect of off-balance items on the Jordanian commercial banks
performance criteria. The test is based on a sample of 13 Jordanian commercial banks listed on the
stock exchange of Amman during the period 2009-2016.
The depend variables of the study included the financial performance standards represented in of rate
of return on assets (ROA) and return on the equity (ROE). The independent variables included the
percentage of off-balance items to the total assets, in addition to three controller variables; namely
credit facilities, equity ratio and the size of the bank.
The results of the study showed that the volume of Jordanian commercial banks off-balance items are
high as they constitute more than one-fifth of the total assets. The results of the regression analysis
showed that the off-balance items have a positive effect with statistical significance on the rate of
return on assets and the ROE. The size of the bank and ratio of the credit facilities granted by the
banks also have is a positive and statistical significance impact on the rate of return on assets and the
ROE. ROE ration has a positive impact on the assets, while ROE ratio has not impact on the rate of
return of equity.
The study recommended that the Jordanian commercial banks must seek to set out limits and certain
ceilings for the levels of off-balance items. The study also recommended the regulatory authorities to
issue instructions and circulars governing the work of off-balance items and determines the allocations
the banks must reserve to face any case where these items have to be paid.

http://www.cscanada.net/index.php/ibm/article/view/9993

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