Omar K. Gharaibeh

This study examines the effect of the COVID-19 pandemic on the performance of the main indices and corporate returns in Jordan. The study employs two samples and two levels of analysis. The first one considers the effect of daily cumulative confirmed cases of COVID-19 on the daily return of the main index and sub-indices of the Amman Stock Exchange (ASE). The time-series analysis shows that there is a strong negative impact of the daily cumulative confirmed cases of COVID-19 on the daily return of the Amman Stock Exchange index. The results also indicate that the financial sector is the most affected during the epidemic, followed by the service and industry sectors. The insurance sector is positively affected, but not statistically significant.
The second level of analysis aims to test how different corporate financial characteristics might affect corporate immunity during the pandemic period. The sample includes all non-financial firms listed on ASE, with a total of 75 firms. Based on quarterly data, the findings show a statistically significant negative effect of the COVID-19 pandemic on non-financial corporate stock returns. Further, the evidence shows that larger firms with higher levels of cash holding have better immunity and thus experience higher returns during the pandemic period.

Due to the lack of studies in the financial literature on indicators of corruption and political instability relative to investment, this paper is considered one of the first studies that examines the impact of two-corruption indicators and political instability on investment in Jordan over the period 1987–2020. Using Fully Modified Ordinary Least Squares (FMOLS) based on annual data, the corruption effect as measured by the corruption score index is a negative and statistically significant impact on investment in Jordan. The second measure of corruption, which is the corruption rank index, confirmed the previous result that corruption has a negative and statistically significant effect. Political instability measured in this study as a dummy variable by wars in the region has a positive and statistically significant effect on investment. For macroeconomic variables, the results show that current government expenditure and interest rate have a negative and significant impact on investment in Jordan. The interest rate factor was the highest coefficient among the negative effects. The study also shows that the investment in Jordan is positively and significantly affected by growth domestic product, imports and local revenue. The gross domestic product showed the highest coefficient among the positive effects. This study concludes that policy makers attempt to apply transparency and minimize the corruption through flexibility, facilitation of procedures and reduced transactions using automation. The study also concludes that decision makers should rationalize current government expenditure and direct banks in Jordan to give greater priority to credit facilities for productive sectors.

This paper examines capital structure determinants for service companies in Jordan between 2014 and 2018. Secondary data from 45 companies were analyzed using the panel regression approach. The results show that the independent variables, suggested as capital structure determinants, have an effect on the debt ratio made by the service companies. Size and non-debt tax shield have a positive significant effect on the debt ratio, while profitability and business risk have a negative significant impact on the debt ratio. In general, the findings support the notion that the trade-off, bankruptcy cost, agency cost and pecking order theories are crucial in explaining the capital structure of Jordanian service companies except for non-debt tax shields and tangibility factors. Jordanian service companies do not use fixed assets as collateral or companies with higher collateral value tend to borrow less debt. Although the coefficient of institutional investors is statistically insignificant, it is still negative and economically significant. This paper concludes that size, profitability, business risk, non-debt tax shields and institutional ownership factors are fundamental in terms of shaping the capital structure in Jordanian service companies.

Due to the uniqueness of the services sector in terms of its characteristics and profitability, as well as the lack of studies on this sector, this study is considered to be the first to improve the knowledge of the key factors that play an important role in the profitability of the Jordanian services sector. This study investigates the effect of financial characteristics and capital structure on the profitability of all 46 services companies listed on the Amman Stock Exchange over the period 2014–2018. This study applies fixed and random effects models to panel data variables, namely, size, tangible assets, growth, business risk, debt to equity ratio and debt to assets ratio as independent variables. At the same time, profitability was measured by operating profits (earnings before interest and tax divided by total assets), return on assets (ROA), and return on equity (ROE), which acted as the dependent variables. This study reveals the first evidence that the debt to assets ratio has a negative and significant impact on the profitability of services companies in Jordan. In line with the pecking order theory, this finding suggests that more profitable services companies tend to prioritize the use of retained earnings in financing business activities rather than in financing debt. This study shows that profitability is significantly and positively affected by size and business risk, while ROA is negatively affected by business risk. It also shows that tangible assets have a negative and significant effect on profitability, while growth has a positive and significant effect on operating profits.