http://ijfr.sciedupress.com International Journal of Financial Research Vol. 11, No. 6, Special Issue; 2020 Published by Sciedu Press 237 ISSN 1923-4023 E-ISSN 1923-4031 Highlighting Determinants of Financial Performance of the Jordanian Financial Sector: Panel Data Approach Hussain A. Bekhet 1 , Jad Alkareem Alhyari 1 & Nora Yusma Mohamed Yusoff 1 1 Universiti Tenaga Nasional, Kajang, Malaysia Correspondence: Hussain A. Bekhet, Universiti Tenaga Nasional, Kajang 43300, Selangor, Malaysia. Received: August 16, 2020 Accepted: October 12, 2020 Online Published: December 15, 2020 doi:10.5430/ijfr.v11n6p237 URL: https://doi.org/10.5430/ijfr.v11n6p237 Abstract This study was aimed at identifying the main determinants of financial performance in Jordanian financial sector over 2005-2016 periods. Profitability ratio (return on equity) was used as a proxy of financial performance measurement. Meanwhile, firms’ specific variables, macroeconomic variables and non-economic factors were used as explanation variables. Panel data set for four sub-sectors of financial sector over the above period were used. Pooled OLS, Fixed effect, random effects techniques with Heteroskedasticity and Serial Correlation Robust Standard Error estimation methods were employed. The empirical results showed that liquidity and leverage were the key determinants of financial performance while risk, macroeconomic factors and non-economic factors do not affect the financial performance of financial sector in Amman Stock Exchange. Therefore, the results conclude that financial performance is mainly driven by firm specific factors (company characteristics). Thus, a sound financial performance can be obtained by giving attention to firm specific variables. Keywords: financial performance, world financial crisis, Arabic spring, panel data, Jordan JEL Classification: C33, G14, G21, G32 1. Introduction Financial performance is a process of measuring the results of a firm's policies and operations in monetary terms. It is used to measure firm's overall financial health over a given period of time and to compare similar firms across the same industry as well as industries or sectors in aggregation. The performance of firms also reflects the main outcomes achieved by individuals or groups in an organisation according to their responsibility and authority in achieving specific targets legally. Therefore, performance gauges the ability of an organisation in managing its resources to improve its competitive advantage utilising several ways (Almajali et al., 2012). Indeed, there are many ways to measure financial performance, but all measures should be taken in economic aggregates and monetary assessment. Among the key economic factors widely used in assessing the financial performance are interest rate, GDP, consumer price index (CPI), stock market index and unemployment, which can show a negative or positive threat to a company’s performance (Egbunike & Okerekeoti, 2018). Also, the performance of a company is affected by macro-economic factors (government policies and regulation, suppliers, social, environmental, political conditions and competitors exist outside the firm control) and micro economic factors [production, leadership product, demand, organisational culture and manufacturing (quality) that exist under the management control] (Dioha et al, 2018; Egbunike & Okerekeoti, 2018). In addition to that, financial performance plays a significant role in determining the financial weakness or strength of a company besides identifying the future growth in a short-term and long-term with the help of financial performance indicators (Kumar, 2014). Besides, according to Abebe and Abera (2019), the financial institutions in the economy of a country play indispensable role for enhancing the effectiveness and efficiency of financial system through intermediation, risk transfer and saving mobilisation. They emphasised that all of subsectors of financial sector play vital role in every economy. For instance, financial stability in the financial markets can be caused by the role of insurers through risk absorption, which provides a sense of peace to the development of an economic as it provides long-term funds. This has been made evident from the crises in Russia, East Asia, Latin America and universe financial crisis in 2007 (Egbunike & Okerekeoti, 2018; Issah and Antwi, 2017; Bekhet & Yasmin, 2014).