The impact of IFRS 9, liquidity risk, credit risk, and capital on banks’ performance

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Abstract

This study investigates the impact of International Financial Reporting Standard (IFRS) 9, liquidity risk, credit risk, and capital on Jordanian banks’ performance. Aiming to mitigate liquidity and credit risks while ensuring adequate capital ratios to prevent bankruptcy. The study aligns with the findings of Abbas et al. (2019) and Abdelaziz et al. (2022), highlighting the influence of these factors on profitability in the Middle East and North Africa (MENA) region. Data from annual reports of 13 banks listed on the Amman Stock Exchange from 2012 to 2021 was analysed quantitatively, focusing on profitability metrics like return on assets (ROA) and equity (ROE). The results indicate a significant impact of IFRS 9 implementation and a negligible effect of liquidity risk. Notably, an increase in credit risk detrimentally impacts both ROA and ROE. The study also discovers a positive link between bank capital and ROA but a negative association with ROE, underscoring the nuanced interplay between risk management and financial performance in banking.

Keywords: IFRS 9, Liquidity Risk, Credit Risk, Bank Capital, Bank Performance

Authors’ individual contribution: Conceptualization — K.A.; Methodology — S.E.; Software — S.E.; Validation — Z.M.; Formal Analysis — S.E.; Investigation — S.E.; Resources — Z.M.; Data Curation — Z.M.; Writing — Original Draft — S.E.; Writing — Review & Editing — K.A.; Supervision — K.A.; Project Administration — Z.M.; Funding Acquisition — K.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G21, G32, G33

Received: 30.07.2023
Accepted: 08.03.2024
Published online: 12.03.2024

How to cite this paper: Eyalsalman, S., Alzubi, K., & Marashdeh, Z. (2024). The impact of IFRS 9, liquidity risk, credit risk, and capital on banks’ performance [Special issue]. Journal of Governance & Regulation, 13(1), 396–404. https://doi.org/10.22495/jgrv13i1siart13