Ghassan Said Omet

External Debt and Economic Growth in Jordan: The Threshold Effect

The Jordanian economy has a serious external debt problem. Based on several indicators, it can be argued that foreign debt has reached an excessive level and has become an impediment to economic growth. This paper examines the impact of external debt on the performance of the Jordanian economy and determines the optimum level of debt, using new econometric techniques that provide appropriate procedures for estimation and inference. The findings of the study indicate that the optimal level of external indebtedness is about 53 percent of GDP. In other words, when the level exceeds this level, its impact on the performance of the Jordanian economy becomes negative.

Determinants of Capital Structure in Various Circumstances: Could They Be Similar?

The financial economics literature has given the capital structure choice of firms a lot of attention. Indeed, this literature includes not only econometric analysis of the determinants of capital structure, but also surveys of Chief Financial Officers on this financial decision. This paper reports the leverage ratios of listed Saudi and Palestinian non-financial firms and examines whether the differences in the determinants of their ratios are due to firms-specific factors, or country-specific difference. Based on a total of 55 listed Saudi firms and 18 listed Palestinian firms during the period 2006-2012, and using the Seemingly Unrelated Regression, and Panel data Analysis, the results indicate that factors like asset structure and firm profitability impact the capital structure of both sets of firms. However, the differences in their impact are due to country-specific and not firm-specific factors. This result is not really surprising given that both sets of firms operated under different political and economic circumstances.

The 2008 Global Financial Crisis: The Case of a Market with Consistent Losses Ever Since

In late 1980’s National Association of Accountants had introduced Activity-based costing – a cost accounting technique which charges organization’s indirect costs to the activities that cause the costs to be incurred and then distributes costs of activities to the products that cause the activities to be performed. Activity-based costing as a management tool has proved its relevance and found its proponents among academics and managers. Introduction of the time aspect into Activity-based costing proved that it is still attracting attention and undergoing development in order to become more accurate. The paramount goal of the implementation is to prove the increased effectiveness and superiority of cost management when using Activity-based costing. It will be achieved by allocation of overhead costs to products with the intention to determine unit costs. This process of allocation will increase the reliability of cost information and improve the information base for product decisions. Moreover, we expect that this approach will more or less alter the profit margin of individual products. This kind of information is very useful when evaluating price-related or keep/drop decisions.

The Capital Structure in Stable and Extremely Unstable Political and Economic Environments

The issue of the financing choice of firms has kept its prominent status in the finance literature. This observation is not really surprising given the fact that the mix of funds (leverage ratio) affects the cost and availability of capital. Recently, a growing number of papers consider the financing issue of firms listed on emerging markets. This interest is due to several reasons including the fact that the problem of information asymmetry is more pervasive in developing countries. This paper examines the capital structure determinants of listed Jordanian and Palestinian companies. This interest stems from the fact that the two countries provide us with two totally contrasting environments. While Jordan has been enjoying stable economic and political conditions, one cannot really exaggerate the extent of the economic uncertainties and political tensions that prevail in the Palestinian Territories. Based on the time period 2003-2006, the reported results show that Jordanian and Palestinian firms have relatively low leverage ratios and that long-term debt is literally non-existent. In addition, the panel data analyses indicate that while the well-known determinants of the capital structure choice of firms are applicable to the Jordanian and Palestinian scenes, the empirical results indicate that there are some differences in the signs and magnitudes of the coefficients of the capital structure determinants. We conclude that these differences are due to country-specific factors rather than firm-specific factors.

The Determinant of Firm Investment: The Case of Listed Jordanian Industrial Companies

Relative to the recent performance of the Jordanian economy, it can be argued that the private sector must be encouraged to increase investment levels. Indeed, the central idea behind the establishment of the Jordanian capital market in 1978 was to promote savings by activating and encouraging investment in bonds and shares and to direct such savings to serve the development of the national economy. The fact that firm investment is an important indicator of the health of economies, this study investigates the investment behavior of listed Jordanian industrial firms during the period 2000-2013. Based on the financial statement of 52 listed industrial firms and panel data analysis, the empirical results indicate that firm investment does respond to stock market valuation (Tobin’s Q). On the other hand, firm’s leverage does not have a significant effects on firm investment. Based on these outcomes, one can argue that the pricing efficiency of the listed firms’ stock is extremely important.

ENTREPRENEURSHIP IN JORDAN: REGIONAL ANALYSIS AND ENVISAGED ROLE

The objective of this paper is to examine the issue of entrepreneurship in Jordan. Based on the survey of Jordanian adults (2006 individuals in total) which is carried out by the Global Entrepreneurship Monitor (GEM), it is reported that entrepreneurship in Jordan is lower than might be expected. In addition, while cultural attitudes are favorable, males are much more likely than females to become involved in entrepreneurial activity. Finally, the results indicate that while the density of entrepreneurship at the regional level reflects some significant differences, fear of failure is one of the most significant factors that impact entrepreneurial activity. Jordanian policy-makers should not assume that by promoting entrepreneurship per se, the national economy will achieve strong economic growth, and reduce unemployment levels. Such a well-intentioned policy might lead to nothing but disappointment at the macro level. Unless the quality (and quantity) of entrepreneurship improves, the likely impact of Jordanian entrepreneurship, especially female entrepreneurship, will remain centered around poverty reduction.

On the Bid-Spread in The Jordanian Banking Sector: What are the Implications?

This paper measures the bid-ask spread for all listed Jordanian banks and examines its’ determinants. Based on a total of 15 banks and the time period 2012-2014, the results show that Jordanian banks’ stocks suffer from relatively high liquidity cost. This finding has a number of implications to the banks’ cost of capital, and the behavior of their stocks’ return. In addition, unless the management of the capital market takes the issue of stock liquidity more seriously, it is argued that such listed firms (banks) might choose to cross-list their stocks or leave the local market altogether and list their stocks abroad. As expected, the objective of such a move is to improve their stocks’ liquidity and hence, realize the envisaged benefits.

Market Discipline in Banking: The Jordanian Experience

This paper applies the issue of bank discipline to the Jordanian banking sector. Based on a total of 13 banks, the time period 2001-2012, and the Seemingly-Unrelated Regression (SUR), the results, on average, show that Jordanian depositors demand higher interest rate from banks with higher levels of risk. In addition, depositors seem to withdraw their depositors from banks with increasing levels of risk. These results are encouraging. Indeed, they indicate that depositors’ disciplining behavior complements the efforts of the Central Bank of Jordan (CBJ).