IMPACT OF BANK ASSET AND LIABILITY MANAGEMENT ON PROFITABILITY: EMPIRICAL INVESTIGATION
IMPACT OF BANK ASSET AND LIABILITY MANAGEMENT ON PROFITABILITY: EMPIRICAL INVESTIGATION

Summary/Abstract: The recent financial crisis has created significant issues for insurers in managing their ALM. Regulatory change towards Solvency and a fair value/realistic approach also leads to greater transparency as regards risk management and the stability of the economic balance sheet. In this context this study examines the factors that are responsible for differences between returns from assets and cost on liabilities experienced by banks in Jordan. This study deals with the impact of Asset and Liability Management (ALM) on the profitability of the fourteen Jordanian Commercial banks from the period 2005 -2008 The regression used and the results indicate in every year and in all years a highly significant relationship between A/ATA and L/ATA and operating income at 1% and when inter the non- balance sheet variables, the results also show a highly significant relationship between the Herfindahl Index and inflation at 1%. Finally, the most important component of this structure is the Assets and Liabilities Committee (ALCO) that has the greatest responsibility in building of the general strategy and the supervision of the whole function of assets and liabilities management.

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