THE IMPACT OF ISLAMIC BANKS' PROFITABILITY INDEX ON THE PERFORMANCE OF THE AMMAN STOCK EXCHANGE DURING 2011-2021

Maher Mohammad Saleh Sharrab and Zaid Othman Mohammed Dannoun
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Maher Mohammad Saleh Sharrab: Business College, Hashemite University, Zarqa, Jordan.
Zaid Othman Mohammed Dannoun: Faculty of Finance and Administrative Sciences, Al-Madinah International University, Kuala Lumpur, Malaysia.

Studii Financiare (Financial Studies), 2024, vol. 28, issue 1, 50-68

Abstract: In the evolving global economic landscape marked by technological advancements, liberalized markets, and the ascent of multinational corporations, Islamic banks have emerged as pivotal entities within the new economic paradigm, addressing the financial needs of societies eschewing Riba (interest) transactions. This study investigates the impact of Islamic banks' profitability indices on the performance of the Amman Stock Exchange (ASE) through the lens of the Stock Price Index (PIX) over the period 2011-2021, with Jordan serving as the focal point due to its significant financial sector development, particularly in Islamic banking. Employing a quantitative analysis approach, the study leverages financial data from three major Jordanian Islamic banks and the ASE, applying statistical tools within the EViews software for analysis. The findings indicate a positive and significant relationship between the profitability indices of Islamic banks and the PIX, affirming the hypothesis that Islamic banks' profitability indices significantly influence the ASE's performance. This relationship underscores the integral role of Islamic banking in enhancing financial market performance, particularly in economies with a substantial Islamic banking sector. The study highlights the resilience and success of Islamic banks amidst global economic challenges and their ability to positively impact the financial market's performance, recommending further research on the multifaceted effects of Islamic banking on market dynamics and advocating for liquidity management to bolster economic activity and market performance.

Keywords: Jordan economy; financial institutions; financial market; COVID-19 (search for similar items in EconPapers)
JEL-codes: G21 O16 (search for similar items in EconPapers)
Date: 2024
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