Determinants of firm profitability: empirical evidence from Jordan’s service sector

    Hassan Hamad Aldboush   Affiliation
    ; Nashat Ali Almasria   Affiliation
    ; Marah Ferdous Affiliation


This paper examines the financial factors affecting profitability across the listed Jordanian service companies. Insufficient attention has been paid to the influence of profitability specifically revealed by financial indicators. This study adopts the firm effect model. The investigation is established on panel data from 2015 to 2020, based on annual company reports. Regression was used to test the study hypotheses. The research sample is collected from the 46 public service firms listed. The profitability of Jordan’s service firms is measured by three proxies, including, Return on Equity (ROE), Earnings Per Share (EPS) and Return on Assets (ROA). The results reveal that firm size and liquidity positively and significantly impact profitability. Conversely, the findings verify that company efficiency and market power have no significant impact on profitability. Moreover, among Jordan’s service firms’ financial indicators, the findings confirm that neither firm nor sales growth have a significant influence on profitability, while sustainable growth rate has a positive, significant effect on profitability. The firm effects are higher for ROE than ROA and EPS. The study provides beneficial insights for managers and investors by providing effective policies designed to improve profitability. The results also provide shareholders with statistics that will ensure the profitability of companies operating in developing countries, such as Jordan.

Keyword : profitability, service companies, return on equity, return on assets, earnings per share

How to Cite
Aldboush, H. H., Almasria, N. A., & Ferdous, M. (2023). Determinants of firm profitability: empirical evidence from Jordan’s service sector. Business: Theory and Practice, 24(2), 438–446.
Published in Issue
Sep 11, 2023
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Abdulla, Y. (2020). Firms’ profitability: Evidence from Bahrain and Qatar. International Journal of Economics and Business Research, 19(1), 70–87.

Abdulnafea, A. L., Almasria, N. A., & Alawaqleh, Q. (2022). The effect of working capital management and credit management policy on Jordanian banks’ financial performance. Banks and Bank Systems, 16(4), 229–239.

Adrian, T., & Shin, H. S. (2010). Liquidity and leverage. Journal of Financial Intermediation, 19(3), 418–437.

Airout, R. M., Alawaqleh, Q. A., Almasria, N. A., Alduais, F., & Alawaqleh, S. Q. (2023). The moderating role of liquidity in the relationship between the expenditures and financial performance of SMEs: Evidence from Jordan. Economies, 11(4), 121.

Al-Harbi, A. (2019). The determinants of conventional banks profitability in developing and underdeveloped OIC countries. Journal of Economics, Finance and Administrative Science, 24(47), 4–28.

Alarussi, A. S., & Alhaderi, S. M. (2018). Factors affecting profitability in Malaysia. Journal of Economic Studies, 45(3), 442–458.

Alawaqleh, Q. A., & Almasria, N. A. (2021). The impact of audit committee performance and composition on financial reporting quality in Jordan. International Journal of Financial Research, 12(3), 55–69.

Alawaqleh, Q. A., Almasria, N. A., & Alsawalhah, J. M. (2021). The effect of board of directors and CEO on audit quality: Evidence from listed manufacturing firms in Jordan. The Journal of Asian Finance, Economics, Business, 8(2), 243–253.

Alduais, F., Almasria, N. A., & Airout, R. (2022a). The moderating effect of corporate governance on corporate social responsibility and information asymmetry: An empirical study of Chinese listed companies. Economies, 10(11), 280.

Alduais, F., Almasria, N. A., Samara, A., & Masadeh, A. (2022b). Conciseness, financial disclosure, and market reaction: A textual analysis of annual reports in listed Chinese companies. International Journal of Financial Studies, 10(4), 104.

Alduais, F., Alsawalhah, J., & Almasria, N. A. (2023). Examining the impact of corporate governance on investors and investee companies: Evidence from Yemen. Economies, 11(1), 13.

AlGhusin, S. A. N. (2015). The impact of financial leverage, growth, and size on profitability of Jordanian industrial listed companies. Research Journal of Finance and Accounting, 6(16), 86–93.

Alhassan, L. A., Tetteh, L. M., & Brobbey, O. F. (2016). Market power, efficiency and bank profitability: Evidence from Ghana. Economic Change and Restructuring, 49, 71–93.

Almaqtari, F. A., Al‐Homaidi, E. A., Tabash, M. I., & Far­han, N. H. (2019). The determinants of profitability of Indian commercial banks: A panel data approach. International Journal of Finance & Economics, 24(1), 168–185.

Almasria, N. (2021). Determinant governance mechanisms affecting the quality of auditing: The external auditors’ perceptions. British Journal of Economics, Finance and Management Sciences, 18(1), 38–65.

Almasria, N. (2022a). Corporate governance and the quality of audit process: An exploratory analysis considering internal audit, audit committee and board of directors. European Journal of Business and Management Research, 7(1), 78–99.

Almasria, N. (2022b). Determinant governance mechanisms affecting the quality of auditing: The external auditors’ perceptions. SSRN.

Almasria, N. A. (2022c). Factors affecting the quality of the audit process “the external auditors’ perceptions”. The International Journal of Accounting and Business Society, 30(1), 107–148.

Almasria, N., Airout, R. M., Samara, A. I., Saadat, M., & Jrairah, T. S. (2021). The role of accounting information systems in enhancing the quality of external audit procedures. Journal of Management Information and Decision Sciences, 24(S2), 1–23.

Almasria, N., Clark, J., & Choudhury, S. (2018). Empirical evidence on the relationship between internal audit factors and the quality of external audit. International Journal of Management and Applied Science, 4(2).

Alsharari, N. M., & Alhmoud, T. R. (2019). The determinants of profitability in Sharia-compliant corporations: Evidence from Jordan. Journal of Islamic Accounting and Business Research, 10(4), 546–564.

Amponsah-Kwatiah, K., & Asiamah, M. (2020). Working capital management and profitability of listed manufacturing firms in Ghana. International Journal of Productivity and Performance Management, 70(7), 1751–1771.

Bhutta, T. N., & Hasan, A. (2013). Impact of firm specific factors on profitability of firms in food sector. Open Journal of Accounting, 2(2), 19–25.

Damar, H. E., Meh, C. A., & Terajima, Y. (2013). Leverage, balance-sheet size and wholesale funding. Journal of Financial Intermediation, 22(4), 639–662.

Dhillon, S. A., & Vachhrajani, H. (2012). Impact of operational efficiency on overall profitability – A case study of GIPCL (Working Paper No. 136/2012). Amrita School of Business Amrita Vishwa Vidyapeetham, University, India.

Dimitrić, M., Tomas Žiković, I., & Arbula Blecich, A. (2019). Profitability determinants of hotel companies in selected Mediterranean countries. Economic Research-Ekonomska Istraživanja, 32(1), 1977–1993.

Dobson, S., & Bill, G. (1989). Growth and profitability in the Leeds engineering sector. Scottish Journal of Political Economy, 36(4), 334–352.

Eling, M., & Jia, R. (2019). Efficiency and profitability in the global insurance industry. Pacific-Basin Finance Journal, 57, 101190.

Geroski, A. P., Machin, J. S., & Walters, F. C. (2003). Corporate growth and profitability. International Journal of Industrial Economics, 45(2), 171–189.

Getahun, M. (2016). Capital structure and financial performance of insurance industries in Ethiopia. Global Journal of Management and Business Research, 16(7), 45–53.

Gharaibeh, O., & Bani Khaled, H. M. (2020). Determinants of profitability in Jordanian services company. Investment Management and Financial Innovations, 17(1), 277–290.

Goddard, J., Tavakoli, M., & Wilson, O. S. J. (2006). Determinants of profitability in European manufacturing and services: Evidence from a dynamic panel model. Applied Financial Economics, 15(18), 1269–1282.

Gschwandtner, A. (2005). Profit persistence in the “very” long run: Evidence from survivors and exiters. Applied Economics, 37(7), 793–806.

Habib, H., Khan, F., & Wazir, M. (2016). Impact of debt on profitability of firms: Evidence from non-financial sector of Pakistan. City University Research Journal, 6(1), 70–81.

Hamid, S. F. (2017). The effect of market structure on banks’ profitability and stability: Evidence from ASEAN-5 countries. International Economic Journal, 31(4), 578–598.

Hermanson, R. H., & Edwards, J. D. (2005). Financial accounting: A business perspective (9th ed.). Open Textbook Library.

Jang, S., & Park, K. (2011). Inter-relationship between firm growth and profitability. International Journal of Hospitality Management, 30(4), 1027–1035.

Keramidou, I., Mimis, A., Fotinopoulou, A., & Tassis, C. D. (2013). Exploring the relationship between efficiency and profitability. Benchmarking: An International Journal, 20(5), 647–660.

Lee, S. (2014). The relationship between growth and profit: Evidence from firm-level panel data. Structural Change and Economic Dynamics, 28, 1–11.

Lim, H., & Rokhim, R. (2021). Factors affecting profitability of pharmaceutical company: An Indonesian evidence. Journal of Economic Studies, 48(5), 981–995.

Ma, W., Renwick, A., & Zhou, Z. (2020). Short communication: The relationship between farm debt and dairy productivity and profitability in New Zealand. Journal of Dairy Science, 103(9), 8251–8256.

Masadeh, A. A., Saadat, M., Almasria, N. A., Jrairah, T. S., & Alsawalhah, J. M. (2021). Investigating the role of applying the quality cost approach in the manufacturing system in the public shareholding manufacturing company in Jordan. Academy of Accounting and Financial Studies Journal, 25(5), 1–14.

Masadeh, A., Jrairah, T., Almasria, N. (2023). The impact of applying the target cost approach on products’ structure (products pricing, development and quality). International Journal of Professional Business Review, 8(6).

Mohd Zaid, N. A., Wan Ibrahim, W. M. F., & Zulqernain, N. S. (2014, February). The determinants of profitability: Evidence from Malaysian construction companies. In Proceedings of 5th Asia-Pacific Business Research Conference (pp. 1–13). Kuala Lumpur, Malaysia.

Nanda, S., & Panda, A. K. (2018). The determinants of corporate profitability: An investigation of Indian manufacturing firms. International Journal of Emerging Markets, 13(1), 66–86.

Narwal, K. P., & Pathneja, S. (2016). Effect of bank-specific and governance-specific variables on the productivity and profitability of banks. International Journal of Productivity and Performance Management, 65(8), 1057–1074.

Nguyen, T. N. L., & Nguyen, V. C. (2020). The determinants of profitability in listed enterprises: A study from Vietnamese stock exchange. The Journal of Asian Finance, Economics and Business, 7(1), 47–58.

Orser, J. B., Hogarth-Scott, S., & Riding, L. A. (2000). Performance, firm size, and management problem solving. Journal of Small Business and Management, 38(4), 42–58.

Pervan, M., Pervan, I., & Ćurak, M. (2019). Determinants of firm profitability in the Croatian manufacturing industry: Evidence from dynamic panel analysis. Economic Research-Ekonomska Istraživanja, 32(1), 968–981.

Pratiwi, S. M., Miftahuddin, M., & Amelia, W. R. (2020). Pengaruh current ratio (Cr), debt to equity ratio (Der), dan earning per share (Eps) terhadap harga saham pada Pt. Indofood Sukses Makmur Tbk. Jurnal Ilmiah Manajemen dan Bisnis (JIMBI), 1(2).

Rehman, Z. M., Khan, N. M., & Khokhar, M. (2014). Select financial ratios as a determinant of profitability evidence from petrochemical industry in Saudi Arabia. European Journal of Business and Management, 6(6), 187–196.

Roper, S. (1999). Modelling small business growth and profitability. Small Business Economics, 13, 235–252.

Seissian, A. L., Gharios, T. R., & Awad, B. A. (2018). Structural and market-related factors impacting profitability: A cross sectional study of listed companies. Arab Economic and Business Journal, 13(2), 125–133.

Serrasqueiro, Z. S., & Nunes, P. M. (2008). Performance and size: Empirical evidence from Portuguese SMEs. Small Business Economics, 31(2), 195–217.

Spierdijk, L., & Zaouras, M. (2016). The Lerner index and revenue maximization. Applied Economics Letters, 24(15), 1075–1079.

Stierwald, A. (2010). Determinants of profitability: An analysis of large Australian firms (Melbourne Institute Working Paper Series wp2010n03). Melbourne Institute of Applied Economic and Social Research, University of Melbourne.

Tan, Y. (2017). The impacts of competition and shadow banking on profitability: Evidence from the Chinese banking industry. The North American Journal of Economics and Finance, 42, 89–106.

Velnampy, T., & Anojan, V. (2014). Capital structure, liquidity position and their impact on profitability: A study of listed telecommunication firms in Colombo Stock Exchange (CSE), Sri Lanka. Research Journal of Finance and Accounting, 5(9), 131–139.

Warrad, L., & Al Omari, R. (2015). The impact of turnover ratios on Jordanian services sectors’ performance. Journal of Modern Accounting and Auditing, 11(2), 77–85.

Yazdanfar, D. (2013). Profitability determinants among micro firms: Evidence from Swedish data. International Journal of Managerial Finance, 9(2), 151–160.

Yazdanfar, D., & Öhman, P. (2014). The impact of cash conversion cycle on firm profitability: An empirical study based on Swedish data. International Journal of Managerial Finance, 10(4), 442–452.