Impact of Assets quality management on profitability and shareholders’ Value – The case of Jordanian Listed Commercial Banks (2001 – 2012)

Abstract

Solidity of the country`s economy depends mainly on the strength of the financial system. (Beck and Levine, 2004), argued that healthy banking sector has a positive influence on economic growth. Being the core of any financial system, banking sector plays an essence role in its stability in recent days. The analysis of the type of assets that banks hold and its quality, is due to the significant importance on the overall performance and the financial results of the bank, IMF (2011) assets quality demonstrate a threat to banking sector stability. This study will investigate and assess the impact of total credit to total  assets and total investment to total assets as a proxy for assets quality (independent variables) on the bank`s performances represented by EPS, ROA, ROE and Book value per share (Dependant variable). Applying multi and simple regression analysis, the most significant result was that bank`s assets quality indicators collectively have a positive impact on the profitability as well as shareholders value indicators, this implies the importance of investment diversification that banks` financial management should take into consideration to achieve sustainability in its performance.