Determinants of Financial Performance of Commercial Banks in Jordan: Application of CAMELS Model
Keywords:Financial Performance, CAMELS Model, commercial banks, Ranking, Jordanian Banks, Regression, Cluster
This study aims to evaluate and analyse the financial performance of the banks listed on the Amman Stock Exchange (ASE) for the period 2016-2020. The study covers 13 commercial banks and excludes the three Islamic banks from the listed banks on the ASE. The study also examines the relationship between CAMELS model components and banks profitability represented by Return on Assets (ROA) and Return on Equity (ROE). All data are collected from the financial statements of the Jordanian commercial banks, the Central Bank of Jordan, previous studies, and the Amman Stock Exchange. Sufficient and adequate analysis is used to analyse the data in this research – Regression Analysis, Coefficient Correlation, and Cluster Analysis using SPSS. The findings show that the Capital Adequacy Ratio, Earning Ability, and Liquidity have a positive but non-statistically significant influence on the financial performance of the Jordanian Commercial banks, as measured by the ratio of ROA and the ratio of ROE. The results also demonstrate that the Asset Quality, Management Efficiency, and Sensitivity to Market Risks all have a negative and non-statistically significant impact on Jordanian Commercial banks financial performance as evaluated by the ROA and the ROE ratios.
AL-ABEDALLAT, A. (2019). The Factors Affecting the Performance of the Jordanian Banks using Camels Model. European Journal of Scientific Research, 152, 116-127.
AMMAN STOCK EXCHANGE. (2020). Annual Report.
ASSOCIATION OF BANKS IN JORDAN . (2020). Annual Report.
BASHATWEH, A., & AL-SHEIKH, E. (2020). Financial Performance Evaluation of the commercial banks in Jordan: Based on the CAMELS Framework. International Journal of Advanced Science and Technology, 29(05), 985-994.
BAWANEH, A., & DAHIYAT, A. (2019). Performance Measurement of Commercial Banks in Jordan Using the Camels Rating System. Academy of Accounting and Financial Studies Journal, 23(6).
CENTRAL BANK OF JORDAN. (2020). Central Bank of Jordan: Fifty seventh annual report 2020. Amman: Central Bank of Jordan. Retrieved October 26, 2021, from https://www.cbj.gov.jo/Pages/viewpage.aspx?pageID=34
GIRIJA , S., & NAYAK, B. (2020). A CAMEL Model Study for Financial Performance of Public and Private Sector Banks in Odisha. Journal of Critical Reviews, 7(13), 2486–2492.
JAWARNEH, S. (2021). Financial Performance of Commercial Banks in Jordan: Application of the CAMELS Model. Prosperitas, 8(2), 4. https://doi.org/10.31570/prosp_2021_0004
KADDUMI, T. (2017). Soundness of Jordanian banks – Camel approach. International Journal of Economic Research, 14(10), 119-127.
KUMHOF, M., & JAKAB, Z. (2016). The Truth about Banks. Finance & Development, 53(1), 50–53.
MISHKIN, F., & SERLETIS, A. (1995). The Economics of Money, Banking, and Financial Markets. Toronto: Pearson Canada Inc.
MISHRA, S., & AGARWAL, D. (2013). Measuring performance of banks using the CAMELS model: a comparative study of CBI and IB. International Journal of Management Research and Review, 3(5), 2914–2922.
MISHRA, S., & ASPAL, P. (2012). A CAMEL model analysis of state bank group. Proceedings of 19th International Business Research Conference. Available at SSRN: https://ssrn.com/abstract=2177081 or http://dx.doi.org/10.2139/ssrn.2177081
NATIONAL CREDIT UNION ADMINISTRATION. (2021). CAMELS Rating System. Proposed Rules (March 9), pp. 13494 - 13498. Retrieved October 26, 2021, from Regulations.gov: https://www.regulations.gov/document/NCUA-2021-0030-0001
OECD. (2013). The role of banks, equity markets, and institutional investors in long-term financing for growth and development: Report for G20 Leaders. February. OECD. https://www.oecd.org/finance/private-pensions/G20reportLTFinancingForGrowthRussianPresidency2013.pdf
ONGORE, V., & KUSA, G. (2013). Determinants of Financial Performance of Commercial Banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237–252.
SAMUEL, D. (2018). Comparative Performance Evaluation of Selected Commercial Banks in India using CAMELS Rating Model. International Journal of Global Sustainability, 2(1), 24–38.
TRUNG, N. (2021). Determinants of bank performance in Vietnamese commercial banks: an application of the camels model. Cogent Business & Management, 8(1). http://dx.doi.org/10.1080/23311975.2021.1979443
How to Cite
Copyright (c) 2022 Saleh Jawarneh
This work is licensed under a Creative Commons Attribution 4.0 International License.