The Determinants of Net Interest Margins in the Jordanian Commercial Banks
Issa Hijazeen

Abstract
The financial sector in Jordan is considered one of the most important sectors as other economic sectors are fundamentally dependent on access to financial services. The financial sector in Jordan witnessed major developments and reforms over the last two decades. The adopted reforms have had some liberalization components and deregulation measures. Net Interest Margin (NIM) is an important tool for tracking profitability of commercial banks. This paper will try to identify the determinants of NIM for panel data of thirteen Jordanian commercial banks during the period (1995-2015). The study has applied Ho & Saunders, (1981) and the extension proposed by Maudos &De Guevara, (2004) using the econometric methods of OLS, fixed and random effects models. The study found that bank specific characteristics explain, to a greater extent, the dynamics of NIM at commercial banks. Macroeconomic factor, represented by the CPIhad a low capacity in explaining NIM variations. Also, the results indicated that the deregulation process and the enhancement of the regulatory frameworks have contributed in the adherence to market powers. Moreover, quality of management has an impact on NIM through decreasing incurred costs. The results did not find evidence to support the belief that foreign ownership has enhanced the institutional quality of banks.

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