Determinants of Financial Performance of Jordan Islamic Bank

The ever-increasing importance of financial performance to companies in coupled with global and domestic competitions, increasing cost and decreasing profitability was the impetus for this study. Despite the copious number of statistical failure prediction models described in the literature, testing of whether such methodologies work in practice are lacking. This Study examines the determinants of financial performance of Jordan Islamic Bank (JIB) during the period 2000-2012. The financial performance (Dependent variable) is measured by Return on Assets (ROA), Return on Equity (ROE), and Return on Unrestricted Investment Accounts (ROUIA). On the other hand, the Independent variables are divided to two categories which are macroeconomic variables and bank specificfactors. Macroeconomic variables are inflation rate, Gross Domestic Product (GDP), and Unemployment rate. Bank specific factors are total income divided by total assets, equity ratio, debt ratio, bank size, and liquidity ratio. Firstly, the researchers  found that there is significance level and positive relationship between ROA on one hand. Inflation, equity ratio, and bank size on the other hand. Also, there is not significant but positive relationship between ROA and GDP. On the other hand, there is significance level and negative relationship between ROA and unemployment rate, and Debt ratio. Moreover, there is insignificance level and negative relationship between ROA and total income to total assets, and liquidity ratio. Secondly, the analysis revealed that there is significance level and positive relationship between ROE on one hand. Inflation and bank size on the other hand. Moreover, there is not significance level but positive relationship between ROE and GDP, equity ratio, and liquidity ratio. We noticed significance level and negative relationship between ROE and unemployment rate, but ROE is insignificant and negative relationship with total income to total assets, and debt ratio. Finally, the analysis revealed that there is significance level and positive relationship between ROUIA and GDP. Moreover, we noticed that there is insignificance level and positive relationship between ROUIA and inflation rate, total income to total assets, equity ratio, and bank size. On the other hand, there is significance level but negative relationship between ROUIA and unemployment rate. Also, there is insignificance level and negative relationship between ROUIA and debt ratio, and liquidity ratio.

Implementation of Aaoifi Standard No.35 by Saudi Islamic Banks: Opportunities and Challenges

Purpose of the study: The research aims to study and analyze the reality of reserves in Islamic banks in light of Financial Accounting Standard No. 35 issued by AAOIFI in 2018. In addition to determining the accounting irregularities or errors, in the practice of accounting and disclosure related to reserves in Saudi Islamic banks.   Theoretical Framework: The research is based on the financial standards of the Islamic banks. Recent financial crises have prompted increased attention from the international community on the need for domestic financial institutions to be strengthened in order to better withstand subsequent emergencies. To ensure national and international financial stability, standards have been developed and implemented to encourage better policies and stronger institutional and market foundations. The international standards community's initiatives provide a comprehensive approach to promote the financial standards of the Islamic banks. It is crucial that self-assessments be supplemented with an impartial external check on conformity with standards.   Design/Methodology/Population: The researchers applied the inductive analytical approach for evaluating the financial standards of the Islamic banks. The study population consists Islamic banks In Saudi Arabia: Bank Albilad, Al-Rajhi Bank, and Alinma Bank. The research analyzed the financial statements of three Islamic banks.   Findings: The research concluded that all Saudi Islamic banks do not apply the accounting standards issued by AAOIFI. These bank's financial statements do not reflect the reality of their financial position, because they only apply traditional accounting standards. The Saudi Islamic banks do not apply the accounting standard issued by AAOIFI Standard No.35. The reasons behind the non-application of Islamic accounting standards issued by the AAOIFI in Saudi Islamic banks are the Saudi Banking Law and the instructions of the Saudi Central Bank. In addition, shareholders in Islamic banks bear all reserves and provisions.   Research, Practical and Social Implications: The research suggests that banking supervisory authorities in the Kingdom of Saudi Arabia have to take the necessary measures to amend the laws and instructions related to Islamic banks., and to follow up efforts by AAOIFI with central banks in the countries in which Islamic banks operate to oblige Islamic banks to the accounting standards issued by AAOIFI.   Originality/Value: The research is unique in identifying the importance of the AAOIFI standards in improving the financial standards of the Islamic banks