The impact of macroeconomic variables and financial soundness indicators on net interest margin: A case study of bank strategy

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Abstract

This study aimed to analyse the impact of macroeconomic variables, such as inflation, economic growth and financial soundness indicators, on net interest margin (NIM) in Jordanian commercial banks. The autoregressive distributed lag (ARDL) model was used to achieve the study’s objectives and test its hypothesis. The study found a long-term equilibrium relationship between these variables. Moreover, the results showed a significant long-term and short-term relationship between financial soundness indicators and NIM in Jordanian banks. While the deposit utilisation ratio, capital adequacy ratio and non-performing loan (NPL) ratio exhibited a positive relationship with NIM, the analysis revealed a negative relationship between the statutory liquidity ratio (SLR) and NIM. However, the analysis did not show any significant impact of inflation and economic growth on the margin in both the long and short term. This study recommends that Jordanian banks adopt transparency policies in disclosing information related to financial soundness, develop advanced credit risk assessment systems and establish a specialised unit to study, analyse and manage bank liquidity, credit policy and NPLs.

Keywords: Net Interest Margin (NIM), Jordanian Commercial Banks, Macroeconomic Variables, Financial Soundness Indicators, Capital Adequacy Ratio, Non-Performing Loans (NPLs), ARDL Model

Authors’ individual contribution: Conceptualization — A.S.Y.Q. and K.A.A.; Methodology — A.S.Y.Q. and E.A.A.; Software — E.A.A. and S.D.A.-O.; Validation — K.A.A., E.A.A., and S.D.A.-O.; Formal Analysis — A.S.Y.Q., K.A.A., and S.D.A.-O.; Investigation — A.S.Y.Q. and S.D.A.-O.; Resources — A.S.Y.Q. and K.A.A.; Data Curation — E.A.A. and S.D.A.-O.; Writing — A.S.Y.Q., E.A.A., and S.D.A.-O.; Visualization — K.A.A., E.A.A., and S.D.A.-O.; Supervision — A.S.Y.Q.; Project Administration — E.A.A.; Funding Acquisition — A.S.Y.Q., K.A.A., and E.A.A.

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

JEL Classification: C32, E43, E44, G21, G28

Received: 21.04.2025
Revised: 03.08.2025; 28.08.2025; 24.12.2025
Accepted: 09.01.2026
Published online: 13.01.2026

How to cite this paper: Qwader, A. S. Y., Alduneibat, K. A., Alqararah, E. A., & Al-Oshaibat, S. D. (2026). The impact of macroeconomic variables and financial soundness indicators on net interest margin: A case study of bank strategy. Corporate and Business Strategy Review, 7(1), 102–111. https://doi.org/10.22495/cbsrv7i1art9