Impact of earnings components on future profitability of banking and insurance companies in Jordan

The purpose of the paper is to select the right market proxy for calculating the expected return, since critically evaluating proxies or selecting the correct proxy market portfolio is essential for portfolio management because the change in the market portfolio proxy affects returns. In this study, monthly data of equity indices are evaluated to find out the better market proxy. The indices taken are BSE 30 (Sensex), Nifty 50, BSE 100, BSE 200, and BSE 500. The macroeconomic variables used in the study are industrial production index (IIP), consumer price index (CPI), money supply (M1), and exchange rate in India. To avoid the influence of COVID-19, the research period was from January 2013 to December 2019 to critically evaluate these proxies in order to find the most appropriate market proxy. This paper reveals a noteworthy relationship between stock market returns and macroeconomic factors, while suggesting that the BSE 500 is a better choice for all equity indices, as the index also shows a significant relationship with all macroeconomic variables. BSE500 is a composite index comprising all sectors with low, mid and large cap securities, therefore it reflects the impact of macroeconomic factors most efficiently, taking it as a market proxy. This study was carried out in the context of India and can be replicated for other countries.

This research explores the influence of foreign ownership on non-financial public shareholding firms in the Amman Stock Exchange (ASE). The study involved an investigation into the connection between non-Jordanian ownership and the company growth opportunity, stock liquidity, leverage, dividend policy and business output. The results highlight that foreign ownership can provide improved corporate governance practices by playing a decisive role in increasing the growth opportunity and enhancing the firms’ market valuation, as measured by Tobin’s Q. Moreover, the findings indicate that companies with foreign board membership have better operating performance and higher firm value. The rewards were reaped by foreign investors based on their superior monitoring ability, which affects the decisions made and actions taken by management.

Dividend policy, as part of corporate governance, is largely dependent on the institutional environment in which companies operate. The study aims to determine factors affecting dividend policy in the conditions of the Ukrainian underdeveloped stock market, legal insecurity of minority shareholders, high cost and concentration of capital. For this purpose, hypotheses about the impact of a company’s financial state, size, business risk, and ownership structure on dividend payments were tested using a sample of 58 Ukrainian non-financial public joint-stock companies and applying Interactive tree classification techniques (C&RT). The resulting classification model for predicting dividend decisions correctly classifies 92.86% of companies that paid dividends and 93.3% of companies that did not. The findings, based on the classification tree and importance scale, prove the hypothesis that companies in which individuals and institutional investors have a controlling interest are more likely to pay dividends than other non-state companies. The financial indicators accurately classify only those firms that do not pay dividends, and business risk does not affect classification accuracy at all. The paper substantiates the ways of using the study findings for economic regulation, protection of minority shareholders’ rights, and proliferation of modern corporate governance practices.