The Impact of Bank Performance and Credit Risk on Capital Structure: An Empirical Evidence of Jordanian Bank Sector

Dua'a Fawzi Shubita
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Dua'a Fawzi Shubita: Department of Finance Business School, Jordan Author-Orchid ID: https://orcid.org/0000-0002-6333-8784

Journal of Social Sciences (COES&RJ-JSS), 2018, vol. 7, issue 4, 350-357

Abstract: The study investigates the impact of credit risk of banks measured by the ratio of reserves of Loan Losses to Gross Loans, the performance of bank measured by Return on Equity ratio, and Bank size measured by the log of the total assets of the bank on capital structure of banks measured by Equity to Asset ratio on 11 Jordanian commercial banks listed in Amman Stock Exchange over the period 2010-2015, The existence of such a relationship has important implications for bank decision makers. The study used Fixed Effect Regression; Empirical evidence showed that bank credit risk has a positive effect on capital structure, while the bank performance has a negative impact on capital structure. In addition, bank size as a control variable played a negative role on capital structure. I also recommended that the future researches will direct to pursue the approach by using substitutional accounting indications of banking risk, and to investigate the impact of the firm’s capital performance and risk on its capital structure.

Keywords: Banks; Capital; Credit; Risk; Firms (search for similar items in EconPapers)
Date: 2018
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