THE EFFECT OF CREDIT AND LIQUIDITY RISKS ON THE FINANCIAL PERFORMANCE OF ISLAMIC BANKS

Abstract

Turki Quritan Wadih Al-Shrari*

The current study analyzes the impact of credit and liquidity risks on the financial performance of Jordanian Islamic banks during the period (2012-2022). In order to achieve this goal, the study data was collected from the annual financial reports published by Jordanian Islamic banks and the analysis was conducted based on the fixed effects model (Fixed Effect Model). The necessary tests were conducted using the Eviews13 program, and the results showed that there is a direct and significant relationship between the capital adequacy ratio and the return on total assets (ROA), and there is an inverse and significant relationship between the size of non-performing loans and the return on assets (ROA), and there is an inverse and significant relationship between the liquidity ratio and the return on total assets (ROA). The study recommended that the Jordanian Islamic banks should do more efforts to activate the role of risk management due to its impact on the financial performance of Jordanian Islamic banks.