Key drivers of bank financial performance: Insights from the Arab Levant region
-
DOIhttp://dx.doi.org/10.21511/bbs.20(2).2025.12
-
Article InfoVolume 20 2025, Issue #2, pp. 143-155
- 52 Views
-
18 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study investigates the key determinants of bank financial performance in the Arab Levant region from 2017 to 2023, focusing on profitability and market valuation, while analyzing internal and external factors, including inflation, capital adequacy, and bank size, amid the unique regional economic dynamics post-Corona Virus Disease in 2019. The study sample comprises 15 Jordanian, 6 Palestinian, 5 Lebanese, and 13 Syrian banks. A descriptive analytical method and STATA were used for the hypothesis testing. The results reveal that inflation, bank type, country, bank size, and capital adequacy positively influence profitability, whereas liquidity ratio negatively affects profitability. Other variables, such as gross domestic product growth rate, country, bank age, operational efficiency, coronavirus, and financial inclusion, have no significant impact on profitability. Additionally, the pandemic and financial inclusion had a statistically negative effect on market valuation, whereas the other variables had no significant influence. This study provides fresh insights into bank performance in the rarely studied Middle Eastern markets by exploring profitability and market valuation within a unique pre- and post-pandemic context, thus enriching our understanding of bank performance in emerging economies. It offers actionable strategies for policymakers and managers to enhance profitability, market value, and resilience by focusing on fintech and equitable financial practices to support societal resilience and economic stability in conflict-affected, emerging economies.
- Keywords
-
JEL Classification (Paper profile tab)G20, G21, C38
-
References78
-
Tables6
-
Figures0
-
- Table 1. Variable descriptions
- Table 2. Descriptive statistics
- Table 3. Multicollinearity matrix
- Table 4. Hausman (1978) specification test
- Table 5. Random-effects GLS regression
- Table A1. List of banks and their core characteristics
-
- Abu Khalaf, B., & Awad, A. B. (2024). Exploring the bearing of liquidity risk in the Middle East and North Africa (MENA) banks. Cogent Economics & Finance, 12(1), 2330840.
- Abusharbeh, M. (2025). Determinants of bank capital adequacy: Empirical insights from Arab countries. Banks and Bank Systems, 20(1), 221-230.
- Abusharbeh, M., Samara, H., & Al-Alawnh, N. A. (2023). Does board structure matter firm’s value? The Jordanian evidence. Problems and Perspectives in Management, 21(2), 567-577.
- Adewale, A. A., Shittu, S. A., & Adewole, J. A. (2023). Effect of Bank’s Sizes and Age on the Financial Performance of Deposit Money Banks in Nigeria. the Journal of V. N. Karazin Kharkiv National University. Series: International Relations. Economics. Country Studies. Tourism, 18, 32-40.
- Adu, D. T., Domfeh, K. O., & Denkyirah, E. K. (2016). Is inflation a threat on financial sector performance. European Journal of Business and Management, 8(33), 59-71.
- Al Frijat, Y. S., Al-Msiedeen, J. M., & Elamer, A. A. (2025). How Green Credit Policies and Climate Change Practices Drive Banking Financial Performance. Business Strategy & Development, 8(1), e70090.
- Al Nimer, M., Warrad, L., & Al Omari, R. (2015). The impact of liquidity on Jordanian banks profitability through return on assets. European Journal of Business and Management, 7(7), 229-232.
- Aladwan, M. S., Samara, H. H., Hani, L. Y. B., & Alrajabi, S. A. A. (2024). The linkage between conservative accounting and financial adequacy and the moderating role of corporate governance. Polish Journal of Management Studies, 29(1), 7-23.
- AlAli, M. S. (2020). Staff Efficiency Effects on Financial Performance: A Case Study on Kuwaiti Banks. International Journal of Business and Applied Social Science, 6(8), 59-63.
- Ali, A. M. (2020). The Impact of Economic Blockade on the Performance of Qatari Islamic and Conventional Banks: A Period-and-Group-Wise Comparison. ISRA International Journal of Islamic Finance, 12(3), 419-441.
- Alkhatib, A., & Harasheh, M. (2012). Financial performance of Palestinian commercial banks. International Journal of Business and Social Science, 3(3), 175-184.
- Almaqtari, F. A., Homaidi, E. A. A., Tabash, M. I., & Farhan, N. H. S. (2018). The Determinants of Profitability of Indian Commercial Banks: A Panel Data Approach. International Journal of Finance & Economics, 24(1), 168-185.
- Alnajjar, A., & Othman, A. H. A. (2021). The Impact of Capital Adequacy Ratio (CAR) on Islamic Banks’ Performance in Selected MENA Countries. International Journal of Business Ethics and Governance, 4(2), 116-133.
- Alslaibi, N. A. (2024a). Cracking the code: Unveiling dividend policy factors in Palestine’s stock exchange (PEX). Edelweiss Applied Science and Technology, 8(5), 2363-2376.
- Alslaibi, N. A. (2024b). Testing Sustainable Solutions: Analyzing the Impact of Fintech on Profitability Before and During COVID in Palestine Banking Sector. Global Business & Finance Review, 29(10), 94.
- Alslaibi, N., & Abdelkarim, N. (2024). The power of ESG factors in driving financial growth: insights from Palestine. Discover Sustainability, 5(1), 241.
- Azmi, Y. U., & Setyowati, L. (2023). Firm Size and Financial Performance on Value of Banking Companies. JPS (Jurnal Perbankan Syariah), 4(2), 116-131.
- Baik, B., Chae, J., Choi, S., & Farber, D. B. (2013). Changes in operational efficiency and firm performance: A frontier analysis approach. Contemporary Accounting Research, 30(3), 996-1026.
- Bambe, B. W. W., Combes, J. L., Kaba, K., & Minea, A. (2024). Inflation targeting and firm performance in developing countries. Journal of Economic Dynamics and Control, 163, 104854.
- Baykara, S., & Baykara, B. (2021). The Impact of Agency Costs on Firm Performance: An Analysis on BIST SME Firms. Pressacademia, 14(1), 28-32.
- Bilalli, A., & Sadiku, M. (2023). The Impact of Inflation on Financial Sector Performance: Evidence. From. Western Balkan Countries. SEEU Review, 18(2), 74-89.
- Boyd, J. H., Levine, R., & Smith, B. D. (2001). The Impact of Inflation on Financial Sector Performance. Journal of Monetary Economics, 47(2), 221-248.
- Burca, A.-M., & Batrinca, G. (2014). The Determinants of Financial Performance in the Romanian Insurance Market. International Journal of Academic Research in Accounting Finance and Management Sciences, 4(1), 407-421.
- Chandrasegaran, L. (2020). Capital Adequacy Requirements and Profitability: An Empirical Study on Banking Industry in Sri Lanka. Journal of Economics and Business, 3(2), 589-601.
- Chatterjee, S., & Simonoff, J. S. (2012). Handbook of Regression Analysis. Wiley.
- Cheng, Q., Goh, B. W., & Kim, J. B. (2018). Internal Control and Operational Efficiency. Contemporary Accounting Research, 35(2), 1102-1139.
- Cook, R. D., & Weisberg, S. (1983). Diagnostics for Heteroscedasticity in Regression. Biometrika, 70(1), 1-10.
- Deitiana, T., & Habibuw, L. G. (2015). Factors affecting the financial performance of property andreal estate companies listed at Indonesia stock exchange. Asian Business Review, 5(2), 79-88.
- Demirgüneş, K. (2016). The Effect of Liquidity on Financial Performance: Evidence from Turkish Retail Industry. International Journal of Economics and Finance, 8(4), 63.
- Demirhan, H. G., & Anwar, W. (2014). Factors Affecting the Financial Performance of the Firms During the Financial Crisis: Evidence from Turkey. Ege Stratejik Araştırmalar Dergisi, 5(2), 65.
- Dietrich, A., & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307-327.
- Durrah, O., Abdul Rahman, A. A., Jamil, S. A., & Ghafeer, N. (2016). Exploring the Relationship between Liquidity Ratios and Indicators of Financial Performance: An Analytical Study on Food Industrial Companies Listed in Amman Bursa. International Journal of Economics and Financial Issues, 6(2), 435-441.
- Fajaria, A., & Isnalita. (2018). The Effect of Profitability, Liquidity, Leverage and Firm Growth of Firm Value with Its Dividend Policy as a Moderating Variable. International Journal of Managerial Studies and Research, 6(10), 55-69.
- Febriyanti, G., Simon, Z. Z., & Oktavia, D. (2024). The Effect of Liquidity, Leverage, Efficiency, and Inflation on Financial Performance. Research of Finance and Banking, 2(1), 1-13.
- Flamini, V., Zabczyk, P., & McDonald, C. (2009). The Determinants of Commercial Bank Profitability in Sub-Saharan Africa (IMF Working Paper No. WP/09/15).
- Freeman, R. E. (1994). The Politics of Stakeholder Theory: Some Future Directions. Business Ethics Quarterly, 4(4), 409-421.
- Greene, W. H. (2000). Econometric analysis (4th ed.) (pp. 201-215). New Jersey: Prentice Hall.
- Gujarati, D. N. (2009). Basic econometrics. McGraw-Hill.
- Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the Econometric Society, 46(6), 1251-1271.
- Herlambang, A., Murhadi, W. R., & Andriani, T. (2020). Factors Affecting the Financial Performance of Companies Based on Agency Theory. Proceedings of the 17 th International Symposium on Management (INSYMA 2020).
- Hoang, T. V. H., Hung, D. N., Tran, M. D., Vu, T. T. V., & Pham, Q. T. (2019). Determinants Influencing Financial Performance of Listed Firms: Quantile Regression Approach. Asian Economic and Financial Review, 9(1), 78-90.
- Homaidi, E. A. A., Tabash, M. I., Farhan, N. H. S., & Almaqtari, F. A. (2019). The Determinants of Liquidity of Indian Listed Commercial Banks: A Panel Data Approach. Cogent Economics & Finance, 7(1), 1616521.
- Hong, S. C., & Razak, S. H. A. (2015). The Impact of Nominal GDP and Inflation on the Financial Performance of Islamic Banks in Malaysia. Journal of Islamic Economics Banking and Finance, 11(1), 157-180.
- Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
- Kayed, S., Alta’any, M., Meqbel, R., Khatatbeh, I. N., & Mahafzah, A. (2025). Bank FinTech and bank performance: evidence from an emerging market. Journal of Financial Reporting and Accounting, 23(2), 518-535.
- Khan, S., Polat, A., & Bashir, U. (2023). Factors Affecting the Financial Performance of Islamic Banks in Pakistan. FWU Journal of Social Sciences, 17(1), 62-76.
- Koross, P. J., Ragama, P. E., & Nyaoga, R. B. (2018). Effects of Operational Efficiency on Financial Performance of Cut-Flower Farms in Nakuru County, Kenya. The International Journal of Business & Management, 6(11).
- Ledhem, M. A., & Mékidiche, M. (2020). Economic Growth and Financial Performance of Islamic Banks: A CAMELS Approach. Islamic Economic Studies, 28(1), 47-62.
- Majeed, M. T., & Zainab, A. (2021). A Comparative Analysis of Financial Performance of Islamic Banks Vis-À-Vis Conventional Banks: Evidence from Pakistan. ISRA International Journal of Islamic Finance, 13(3), 331-346.
- Masa’deh, R. E., Samara, H., Abughaush, S., & Almanadheh, Y. (2024). The Association Among Gender Diversity, Board Characteristics and Firms Performance. In Hamdan, A. (Ed.), Achieving Sustainable Business through AI, Technology Education and Computer Science: Volume 1: Computer Science, Business Sustainability, and Competitive Advantage (pp. 711-734). Cham: Springer Nature Switzerland.
- Moyo, D., & Tursoy, T. (2020). Impact of Inflation and Exchange Rate on the Financial Performance of Commercial Banks in South Africa. Munich Personal RePEc Archive, 15(16), 626.
- Musah, M. B., Kong, Y., & Mensah, I. A. (2019). Exploring the Link Between Operational Efficiency and Firms’ Financial Performance: An Empirical Evidence From the Ghana Stock Exchange GSE. International Journal of Trend in Scientific Research and Development, 3(4), 842-848.
- Nguyen, T. N., & Stewart, C. (2013). Concentration and Efficiency in the Vietnamese Banking System Between 1999 and 2009. Journal of Financial Regulation and Compliance, 21(3), 268-283.
- Njoki, N. M., & Nyamute, W. (2023). Factors Affecting Financial Performance of Commercial Banks in Kenya. Journal of Finance and Accounting, 7(1), 100-115.
- Pererva, P. G., Kobielieva, T. O., Tkachov, M. M., & Diachenko, T. A. (2021). Management of relations with enterprise stakeholders based on value approach. Problems and Perspectives in Management, 19(1), 24- 38.
- Pervan, I., & Dropulić, I. (2020). The Influence of Integrated Information Systems on Firm Financial Performance. Croatian Operational Research Review, 11(2), 301-309.
- Pfajfar, G., Shoham, A., Małecka, A., & Zalaznik, M. (2022). Value of corporate social responsibility for multiple stakeholders and social impact–Relationship marketing perspective. Journal of Business Research, 143, 46-61.
- Pham, C. D., Tran, Q. X., & Nguyen, L. T. N. (2018). Effects of Internal Factors on Financial Performance of Listed Construction-Material Companies: The Case of Vietnam. Research Journal of Finance and Accounting, 9(10).
- Purwohandoko, P., & Iriani, S. S. (2021). Effect of Gross Domestic Product, Liquidity, Size, Growth, Capital Adequacy Ratio, and Inflation on Financial Performance. Equilibrium Jurnal Ekonomi-Manajemen-Akuntansi, 17(1), 46.
- Rashid, A. (2012). CEO Duality and Agency Cost: Evidence from Bangladesh. Journal of Management & Governance, 17(4), 989-1008.
- Ross, S. A. (1973). The economic theory of agency: The principal’s problem. The American Economic Review, 63(2), 134-139.
- Said, M., & Ali, H. (2016). An Analysis on the Factors Affecting Profitability Level of Sharia Banking in Indonesia. Banks and Bank Systems, 11(3), 28-36.
- Samara, H. H., Mohsin, H. J., Hameed, A. T., Al Astal, A. Y. M., Al-Daeef, H. A., Qaisiyah, I. M., & Omary, M. E. (2025). The Role of Financial Technology and Its Impact in Achieving Financial Sustainability: Evidence from Commercial Banks in the Emerging Markets. In Tech Fusion in Business and Society (pp. 713-724). Springer, Cham.
- Samara, H., & Nassar, M. A. (2023). The effect of corporate governance and firm characteristics on firm value: evidence from Jordan. Jordan Journal of Applied Science-Humanities Series, 36(2), 154-171.
- Sasidharan, S., Ranjith, V. K., & Prabhuram, S. (2023). Determinants of Factors Affecting the Financial Performance of Indian General Insurance Firm: Panel Data Evidence. Contemporary Economics, 17, 237-251.
- Saymeh, A. A. F., & Orabi, M. M. A. (2013). The effect of interest rate, inflation rate, GDP, on real economic growth rate in Jordan. Asian Economic and Financial Review, 3(3), 341.
- Shah, S. Q., & Jan, R. (2014). Analysis of Financial Performance of Private Banks in Pakistan. Procedia – Social and Behavioral Sciences, 109, 1021-1025.
- Shair, F., Shaorong, S., Kamran, H. W., Hussain, M. S., Nawaz, M. A., & Nguyen, V. C. (2021). Assessing the efficiency and total factor productivity growth of the banking industry: do environmental concerns matters? Environmental Science and Pollution Research, 28, 20822-20838.
- Singh, S., Tabassum, N., Darwish, T. K., & Batsakis, G. (2018). Corporate governance and Tobin’s Q as a measure of organizational performance. British Journal of Management, 29(1), 171-190.
- Ta, T. T., Doan, T. N., Tran, H. N., Dam, T. A., & Pham, T. M. Q. (2022). Factors affecting the application of balanced scorecard to enhance operational efficiency of listed companies: The case of Vietnam. Cogent Business & Management, 9(1), 2149146.
- Tzelepis, D., & Skuras, D. (2004). The Effects of Regional Capital Subsidies on Firm Performance: An Empirical Study. Journal of Small Business and Enterprise Development, 11(1), 121-129.
- Waqar, M., Waqar, S., Adnan, P., & Shah, K. (2019). Impact of Liquidity Ratio on Profitability of Firm: An Empirical Evidence from Automobile Industry of Pakistan. Research Journal of Finance and Accounting, 10(22).
- Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. MIT press, Cambridge.
- Worku, A. T., Bayleyegne, Y. W., & Tafere, Z. B. (2024). Determinants of Profitability of Insurance Companies in Ethiopia: Evidence from Insurance Companies from 2011 to 2020 years. Journal of Innovation and Entrepreneurship, 13(1), 4.
- Yampolskiy, R. V. (2013). Efficiency Theory: A Unifying Theory for Information, Computation and Intelligence. Journal of Discrete Mathematical Sciences and Cryptography, 16(4-5), 259-277.
- Yusuf, M. S., & Musse, A. M. (2019). The Effect of Capital Adequacy on Islamic Banks’ Profitability in Malaysia. European Academic Research, 7(9), 4722-4737.
- Zoghlami, F., & Bouchemia, Y. (2021). Competition in the banking industry, is it beneficial? Evidence from MENA region. Journal of Banking Regulation, 22(2), 169-179.
- Zuhroh, I. (2019). The Effects of Liquidity, Firm Size, and Profitability on the Firm Value with Mediating Leverage. KnE Social Sciences, 3(13), 203-230.