The Effects of Foreign Bank Entry on the Jordanian Domestic Banking Sector : empirical analysis from 1992 to 2006

Abstract EN

This paper investigates the impact of foreign bank entry on Jordanian domestic banks by using panel data from 13 domestic banks from 1992 to 2006.

The study examines different factors affecting bank performance, including foreign entry, noninterest earning assets, equity level, inflation and economic growth.

The results show that interest rate spreads and operating expenses decline with greater foreign bank entry, foreign entry is significant and negative related to accounting profit of banking sector in Jordan, no effect on banks risk.

The bank-level and general economic factors we employ as control variables are found significant in many cases.

Profit is found to be negatively associated with non interest earning assets (NIA), and positively associated with equity levels (EQ).

Bank risk (RSK) is shown to be significantly affected by two bank-level variables, non-interest earning assets and equity levels.

Finally, the level of GDP is positively related to profits, but not interest rate spreads.