Empirical Examination of Credit Risk Determinant of Commercial Banks in Jordan

Mohammad Motasem ALrfai, Danilah Binti Salleh and Waeibrorheem Waemustafa
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Mohammad Motasem ALrfai: Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Sintok 06010, Kedah, Malaysia
Danilah Binti Salleh: Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Sintok 06010, Kedah, Malaysia
Waeibrorheem Waemustafa: Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Sintok 06010, Kedah, Malaysia

Risks, 2022, vol. 10, issue 4, 1-11

Abstract: The current research aims to examine the credit risk determinants in Jordan’s banks. Macroeconomic factors were included to examine credit risk in commercial banks by adopting the balanced data for the examination between 2008–2019. The result shows that credit risk relates to foreign direct investment (FDI) and the output gap. The relation existed since FDI helped the country create job opportunities, increase administrative efficiency and capacity, and work to exchange technologies, ideas, opinions, and human resources, especially in emerging economies. The output gap relates to CR by the ability that borrowers’ cash inflows are reduced when growth slows or turns negative, making it harder for them to meet the interest and principal of bank loans in exchange, especially in markets that have the potential to decrease the output gap. The result specified that as remittance (REMIT) grows, credit risk considerably accelerates, and the same effect was also recognised for public debt (DEBT). The outcomes revealed an important influence of tax on personal income (TAXINC). The examination result proves that credit risk is affected by several factors, which may relate significantly to implications as expected.

Keywords: credit risk; non-performing loans; Jordan; macro-economic (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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