The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan)

Transcription

1 European Journal of Scientific Research ISSN X / X Vol. 148 No 2 January, 2018, pp europeanjournalofscientificresearch.com The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan) Marwan Mohammad Abu Orabi Dept. of Finance and Business The World Islamic Science & Education University-Jordan P.O.Box 1101 Postal Code 11947, Amman Jordan drmarwan1974@yahoo.com Abstract This study has demonstrated the effect of the Jordanian banking system on the growth of the Amman Stock Exchange(ASE).The main objective is to study the impact of the major bank s financial factors such as the volume of deposits, interest on deposits and certificates of deposit, interest on credit facilities on Amman Stock Market growth. The researcher has used multiple statistic methods; he used the descriptive approach so as to describe the relationship between banking activity and ASE market price, as well he used the analytical method to investigate the mutual impact between the ASE activity and the activity of the banking system. The quantitative analysis has been relying on the use of simple linear and multiple regression mode. The outcome of the study showed a statistically significant correlation between the individual banking variables and the activity of the Amman Stock Exchange as measured by market value. First Chapter General Framework for Study Introduction The relationship between the banking system and the capital market (shares) of great importance for the economies of the countries, Banks and the stock market are a financial basis, which plays a vital role in the optimal investment of the financial resources available to the process and the mobilization of savings, which is pivotal jobs in the economic development process and thus achieve social development. The relationship between the banking system and the stock market is one of the most important topics that are meant by studies and research in most developed countries or developing countries, in terms of contributing to economic development and access to high growth rates by diverting money from units of surplus units deficit. The evolution of the banking system in Jordan sophisticated quantitatively and qualitatively clearly, where the number of licensed specialized banks and a variety of functions and methods in the management of financial resources, along with the adoption of many of the banks to process electronic banking, which enabled it to make financial transactions more quickly, efficiently and at a lower cost, so it's important the banking system as the main source of financing for economic sectors and mobilize savings and channel them towards economic sectors that lead to the desired growth. The investor usually looking for investment opportunities that achieve a higher return at a lower level of risk, and therein lies the problem for the investor, where the relationship between return and risk a direct correlation, meaning that the more risk rose increased yield and vice versa. And so it is natural that there be some kind of competition between the services and investment instruments available in the

2 The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan) 295 banking system and the capital market, on the grounds that the capital market tools are long-term instruments and the carrying amount of the biggest risks of financial instruments provided by the cash market, which are generally short-term and less risky. Which makes some economic literature suggests the possibility of a negative impact of the activity of each of the two markets on the other, or in other words we can say that the relationship between those two markets competitive relationship. On the other hand you see some economic literature that there is a positive relationship between the banking system activity and the activity of the capital market, as both markets are complementary to each other and there is no competition between them Due to different financial instruments or investment instruments differ in each. In terms of sources of funding for the economic sectors can be divided into exporters presidents, the first source internal, arising from the profits that operate businesses on recycled, while the second source outside it, is divided in turn into two types Also, bank financing through loans and credit facilities of all kinds, or funding through the issuance of shares and bonds in the capital market. Hence raised controversy about the relationship between bank financing and market financing, in terms of their being complementary, or that one replace the other, they show some banks fear that the primary market for capital growth, the belief that it will lead to a decline in the volume of loans has, in particular those duration of more than one year, as are bank loans and short-term renewable, which necessarily leads to lower profits, assuming the stability of other factors. Contrary to the above, there is a group of banks that see the importance of working on the development of the capital market, through direct investment, and employment of the available funds which, since they make an acceptable return, within a reasonable degree of risk, as it would open the door for these banks to participate in the management of businesses and control. Some of Economic Research believes that the capital market had a positive impact on deposits in the banking system, and there is no competition between them Due to different financial instruments or investment vehicles. Where you could market capitalism to attract capital from abroad and are deposited in the banking system, on the other hand, the movement of buying and selling in the capital market is done through the monetary system and the transition from one individual to another or from one individual to the company within the banking system. It is worth mentioning that the economic theory (the theory of the treasure) indicated that increasing the recovery of the capital market will lead undoubtedly to increase savings and consumption, Rising stock prices or assets lead to increased economic activity, and vice versa, with the increase in per capita wealth, this leads to increased savings and investment (weighted, and Rifai, 2007). This study attempts to shed light on the nature of the relationship between the Jordanian banking system activity and the activity of the Amman Stock Exchange, and the statement of the relationship between the type of relationship Are they competitive or complementary relationship. The Problem of the Study There were many opinions about the nature of this relationship, some studies have indicated that the relationship between the activity of the banking system and stock market activity competitive relationship, while some others pointed out that the relationship between the two complementary relationship. Most of the studies carried out in developed countries, confirmed the existence of a strong relationship between banking activity and the activity of the stock exchange and that the device this activity interchangeably. The researcher points out that the problem of the study is an attempt to analyze the relationship between the banking system activity and the activity of the Amman Stock Exchange. Therefore, the problem of the study is to attempt to answer the following questions: 1. Do no impact of the activity of the banking system of credit facilities on the activity of the ASE market capitalization? 2. Is there an effect of the activity of the banking system of interest rates on certificates of deposit on the activity of the ASE market capitalization?

3 296 Marwan Mohammad Abu Orabi 3. Is there an effect of the activity of the banking system of interest rates on credit facilities on the activity of the ASE market capitalization? 4. Is there an effect of the activity of the banking system of deposit rates on the activity of the ASE market capitalization? The Importance of Studying Considering that the banking system and the capital market constitute a financial system that acts as a vital indispensable in driving economic growth through optimal allocation of available financial resources, and mobilize savings towards investment, it is here stems the importance of this study in terms of the importance of the role played by both banking and the stock market the device in the impact on economic activities through the creation of liquidity, and directed towards investments are economically feasible, to ensure that in the end, support and development of economic stability in the state where it is necessary to clarify and analyze the correlation between the banking system activity and the volume of trading and the impact of each On Other. There are some studies that have dealt with this relationship, but in different ways, this study complements the efforts of other researchers in the relationship between the banking system activity and the activity of the ASE analysis. Objectives of the Study This study aims to analyze the direction and degree of the relationship between the activity of the banking system and Activity Amman Stock Exchange by measuring the effect of a change in bank credit to the private sector size, change in interest rates, changes in Alvidh rates on certificates of deposit, and interest rates on credit facilities on the market value at the Amman Stock Exchange. Through the above, you will be the relationship between the banking system and the analysis of the Amman Stock Exchange for securities, the degree of the impact of the banking system on the activity of the Amman Stock Exchange. And thus come up with recommendations that will strengthen the relationship between them on the grounds that they Akunan financial system of any economy and therefore the integrity of the relationship between them will leave a positive impact on the economy and ensure the achievement of the desired economic growth. Study Limitations This study has faced a number of parameters during the period of preparation, and the most important of which was the lack of sufficient data for a number of financial variables, prompting excluded from the study. And it will be the preparation and organization of the study according to the following controls: 1. limited data and information adopted in this study on local activities working in Jordan for the banks, local and foreign, so do not include any activities or bank statements provided by the Jordanian banking system working outside Jordan borders, through branches scattered in the Arab countries, or other countries the world. 2. correlation of this study in the private sector without government, and that is the value of domestic credit to the private sector, and the same applies for bank deposits, which will adopt the value of private sector deposits as variables in this study. 3. accreditation issued by the Central Bank and commercial banks of data about bank credit size and the volume of deposits and interest rates for the facilities and certificates of deposit for the banking system, as well as data and information issued by the Amman Stock Exchange and the Securities Commission approval regarding the volume of trading in the securities market in Jordan and that of 1992 until 2009, a total of 18 years, where is the end of the period is the last year for which data and information available for the purposes of this study.

4 The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan) 297 Chapter Two The Theoretical Framework of the Study An Overview of the Banking System in Jordan CBJ task of supervision exercised control over the work of the banking system in Jordan through direct control over their work and activities, and is made up of the banking system institutions in Jordan until 2009, as shown in the table (2-1) from 23 banks, including two banks Islamists, and eight branches of foreign banks, exercise these banks its business through 66 branches and 67 representative offices distributed within Almmmlkh, while the number of branches of Jordanian banks operating abroad has reached 138 branches until 2009, as well as lending institutions specialized, and exchange companies, and representative offices outside Kingdom of Jordanian banks (Central Bank of Jordan, the annual report, 2009). Banks play a key role in driving economic growth through the mobilization of national savings and used to finance productive economic sectors, as well as development requirements, and achieve the goals of monetary policy, they are an effective tool in achieving these goals, with the banking sector contributed to the achievement of the objectives of monetary policy in the the framework of the economic reform program since 1989, which was to maintain the stability of the dinar exchange rate, and adjust cash flow, and build foreign exchange reserves, and the adoption credit and investment policies oriented to support some economic sectors targeted. Led maintaining monetary and financial stability and ensure the conversion Jordanian Dinar in light of the structure of interest rates is compatible with the volume of economic activity and the maintenance of a sound and solid in the provision of an attractive investment environment, banking system, and this has been reflected in the increasing ownership percentages non-jordanians in Jordanian banks, which rose from 38.6% in in 2003 to 51.7% at the end of the first half of 2009, reflecting increased investor confidence in the banking system, in particular the Jordanian economy in general, (the Central Bank of Jordan, annual report, 2009). Activity Banking System and its Relationship with the Bourse Constitute the banks and the capital market and financial system of any economy, and that the study and understanding of the relationship between them comes from their importance in contributing to the economic development and the achievement of high rates of growth in national income. Commercial banks have become trace modern methods in the field of investment funds and more damaging to the needs of customers, especially in those areas that are difficult for customers to make investments by themselves as required by the special expertise and skill, or may not find enough time to invest as a result of their working conditions. Besides that financial markets have seen and Exchange considerable development in performance and the degree of transparency and safety for customers and investors, giving great flexibility and different information to clients, especially after using the electronic trading system as an alternative to the system manual trading in many financial markets and stock exchanges, including the Amman Stock Exchange, like other world bourses mid-2000 banking thought I saw, as well as financial successive developments, and through the evolution of the work of the banking system in quantity and quality, and can represent the evolution through the emergence of several types of banks such as the comprehensive bank (Universal bank), which is defined as a bank that offers a full range of banking services and diversify their sources of obligations as well as working on the development of new services such as the adoption of new projects and promotion, and to ensure coverage of underwriting and portfolio management, (Hanafi, Abu cranium, 2004), and the bank-mail (E.Banking), a bank that offers electronic banking services in forefront of ATM services and banking over the telephone and the Internet (Ganbaha, 2006), investment banks (investment bank), a bank that offers modern methods in the field of investment funds and of services is difficult for customers to do, such as evaluation of investment proposals, and trading in securities, (dry, The Indian, 2000). As well as do some banks in combination with other non-banking institutions under the umbrella of (the holding company), all this has led to banks departure from its traditional role as a deposit and the

5 298 Marwan Mohammad Abu Orabi granting of loans. It highlights here the investment activity of the bank of the composition (investment portfolio) of the bank from various local and external financial assets other. Amman Stock Exchange ASE was founded with the financial market establishment on under the Amman Financial Market's name, but the name was changed after that on 11 March 1999 to become the Amman Stock Exchange and operates as an independent, not-for-profit and run by the private sector and are authorized to carry out the business as a market regulator for securities trading in the UK. ASE is managed by a board of directors Mnspah members and the executive director shall manage and monitor the daily work of the Stock Exchange, the bourse membership of financial intermediaries and Dealers and any other entities designated by the Commissioners of the Securities Commission Council is made up, and who make up the General Commission of the Stock Exchange, and is composed of 70 brokerage office. ASE is committed to providing the principles of transparency, efficiency and liquidity, as the bourse seeks to provide a safe and healthy trading securities and establishing a proper and fair trading founded the environment, protecting the dealers in the capital market, and to do so ASE application of standards systems in line with international standards (ASE, report annual, 2009). The Amman Stock Exchange to provide electronic systems and means of connecting rooms equipped with the tools and techniques of modern, monitor the trading in the market, and coordination with the Commission in the follow-up of those operations. It has also established standards of professional conduct to ensure its members commitment to the principles of fair and proper circulation, is also keen on the need for immediate and proper dissemination of information to all those interested in the same Aelloukt.tmutir Amman Stock Exchange to establish cooperative relations with the stock exchanges, associations and international organizations and the conclusion of agreements with them, and to participate in the conference of Arab and international symposiums, a an active member of the Union of Arab stock exchanges, and the Union Although European and Asian stock markets, the international Federation of exchanges and the international Organization of Securities Commissions. Chapter Three Previous Studies The relationship between banking activity and the activity of the stock exchange with interest many financial researchers and economists alike device, several studies were conducted using multiple methods of statistical tools. It could be argued that many of these studies led to the conclusion that there is a relationship between my both the banking system and financial market actress Stock Exchange securities. One of these studies include: Arab Studies 1. Hanna study, (2000) entitled "The role of accounting information in the rationalization of investment policies and assess the portfolio in commercial banks," This study has clarified the role of accounting information in the rationalization of investment policies and assess the portfolio in commercial banks, and concluded that the investment in stock ranked second after the loans, and he will be a substitute for it sometimes when least demand for loans, as well as facing many problems with regard to investment in securities of banks these problems are summed things related to the composition of the portfolio and the selection of securities that meet the investment objectives, problems relating to the management and follow-up investment such securities and harmonization between factors (liquidity, profitability, risk). 2. Hutra study, (1999) titled "The Algerian financial market's role in the financial resources available to mobilize," a researcher at the examination of the statement of the Algerian financial

6 The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan) 299 market's ability to available financial resource mobilization aimed and that between the year 1990 for the period to 1999, the study showed that there are weak in the role of the Algerian financial market to mobilize the financial resources available despite the fact that there are a number of reforms that took place in this regard. Researcher due largely to several reasons, the most important acquisition of the banking sector, the bulk of domestic savings. 3. drashhariz, (1999), entitled "The role of the banking system in the primary market of the capital of Jordan to develop," this study was to show the relationship between bank financing funding market for the first financial papers in Jordan, the study concluded that there is an inverse relationship between bank credit and underwriting stocks issued by public shareholding companies, in addition to the absence of a relationship linking bank credit bonds issued by companies that, as well as the study pointed to the existence of a positive significant effect of the securities portfolios in the largest of the negative impact of the banking credit to the issuance of shares of banks, which means that Htak complementary rather than competitive relationship between the banking system and the market for initial capital. 4. drash Marwan, (1992), entitled "The role of commercial banks in the revitalization of the stock market," This study has shown interest in highlighting the role of commercial banks in the revitalization of the stock market in Egypt, by focusing on investment activities performed by banks, represented by investing indirectly shares and bonds in the primary market, or via the investment portfolio, by trading in securities listed on the secondary market, or submission of financial intermediation services, should lead to the development of the capital market, and this study indicated the presence of some of the factors that limit the role of the banking system in the revitalization the stock market, in terms of diminutive of securities offered in the size of the market, in addition to inadequate legislation and laws governing banking activities in the capital market, in addition to the lack of a banking system of specialized financial institutions, so incumbent upon the distribution of risk underwriting, promotion modern versions of the securities, and any specialized services needed to deal in the financial market. Foreign Studies 1. Study, (2004) alam&gazi titled "Relationship Between Interest Rate & Stock Price", and translated the relationship between interest rates and stock prices: This study aimed to test the relationship between interest rates and stock prices through the monthly data of stock prices and the prices interest for fifteen state are (Australia, Bangladesh, Canada, Chile, Colombia, Germany, Italy, Jamaica, Japan, Malaysia, Mexico, Philippines, South Africa, Spain, and Venezuela) for the period from 1988 up to 2003, and using the method of regression, and the result of this The study that was negative relationship between Osar interest rates and stock prices, and so for all the sample countries, and therefore these countries if they could Command and control interest rates will have a significant benefit for the stock market and increased demand for securities. 2. Becketti& Morris study, (1995), titled "Financial Markets And Institutions", and translated the financial markets related to financial institutions: this study was to show whether the bank loans in the United States still has conservatively, in terms of being the first source in financing economic activities has, compared with the funding market and funding through the issuance of commercial paper, and the researchers measured the bank credit flexibility, the study reached the conclusion that the interest rates between banks were not the same moral acceptable in the first part of the study ( ), while the results of the second period analyzed ( ) with a statistically significant indication, due to the growing market financing rates of growth during the second period is higher than the increase in bank loans and advances rates, as almost to market financing becomes a substitute strongest finance banking. 3. drashmcmillan, (2005) titled "Time Variation InTheCointegrating Relationship Between Stock Prices And Economic Activity"

7 300 Marwan Mohammad Abu Orabi And translated, the contrast schedule in the integration of the relationship between stock prices and economic activity: This study aimed to release the relationship between the market index of the shares and the output and interest rates. The study sample consisted of companies listed on the stock market in the United States, was used monthly data for these companies from the period of , the study found that there is positive correlation between the share price and industrial production, and that the relationship there is a negative correlation between the share price and interest rate relationship. 4. drash Gregorio (2003), entitled "The Impact Of Savings Institutions On Securities Market", and translated savings on the stock market institutions influence: This study aimed to determine the effect of deposit institutions on the financial market, the study concluded that there is the effect of a positive relationship between the increase in the volume of deposits and increase bond size, especially in the developed countries that have a great deal of disclosure and ease of circulation among investors and financial information. Chapter Four The Study Methodology The Study Model Complementing address the problem of the study and achieve its goals, the model hypothetical study shows the impact of activity of the banking system represented by the independent variables (credit mode, and the average interest rate on credit rates, and the average interest rates on deposits, the average interest rates on certificates of deposit) on the activity of the ASE representatives at market value. The model was built in the light of a number of academic studies and research findings that dealt with the subject, as the market value of a variable as a variable adopted for being affected by a number of variables activity of the banking system was in the forefront of the credit Mngeraltsuhalat and in return also adopted a variable size of private sector deposits in a lot of studies being affected a number of variables Activity Amman Stock Exchange was in the forefront of the index and the size of the Altdaol.oualemngar represents the market value of the Amman Stock Exchange Securities. The Study Methodology 1. menhj descriptive: method of analysis and interpretation in a scientific organizer for access to specific purposes and is a way of describing the phenomenon studied and photographed quantified by collecting information on the problem and classified, analyzed and subjected to minute study has this manner adopted in this study to describe the relationship between the device activity banking and activity of the Amman Stock Exchange. 2. Analytical Approach: This study aims at mutual impact between the ASE activity and the activity of the banking system analysis and it has been relying on the approach to quantitative analysis through the use of simple linear regression and multi-style, and associated with this method of testing for the quality of forecasting and moral regression coefficients such as the coefficient of determination R2 and statistical F and statistical t. Hypotheses This study is based on the impact test activity of the banking system on the activity of the Amman Stock Exchange through a number of variables such as credit facilities, total bank deposits, the interest rates on credit facilities and deposits, trading volume, the value of primary market issues, and the rate of stock turnover. Aladmetin following two hypotheses study relied exile as follows: Home nihilistic premise: (H01): There is no statistically significant relationship to the impact of the banking system activity on the activity of the Amman Stock Exchange, and the ensuing following sub-hypotheses:

8 The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan) 301 H01.1: No statistically significant effect of credit facilities to the private sector on the market value at the Amman Stock Exchange relationship. H01.2: No statistically significant effect of the average interest rates on certificates of deposit in the banking system on the market value at the Amman Stock Exchange relationship. H01.3: No statistically significant effect of the average interest rates on deposits relationship Banking on the market value at the Amman Stock Exchange. H01.4: No statistically significant effect of the average interest rates on banking facilities on the market value at the Amman Stock Exchange relationship. The study population: The study population consisted of sixteen Jordanian bank listed on the Amman Stock Exchange, as well as have been identified and the trading volume of the market value of the shares of all economic sectors (financial sector and industry, and services) listed on the Amman Stock Exchange sector during the period of study. Sources and methods of data collection: This study was based on the following sources: 1. annual reports and monthly bulletins issued by the Central Bank, the study also relied on desktop sources and include access to the sources of information available from previous studies, books and references Arab and foreign periodicals concerning the subject of the study. 2. statistical data issued by the Amman Stock Exchange and Securities Commission Chapter Five Data Analysis and Hypothesis Testing Description of Study Data It was approved by the Central Bank of Jordan data in addition to the published financial statements issued by banks in Jordan about the banking system activity in Jordan, where the table represents variables (5-1) study concerning the activities of the Jordanian banking system variables during the study period from 1992 to Table 1-5: Average interest rates on certificates of deposit% Average interest rates on bank deposits % Average interest rates on bank facilities% Credit facilities The size of private sector deposits Source: Central Bank, annual statistical data, different numbers for the years the year

9 302 Marwan Mohammad Abu Orabi Notes: from the table (1-5) above the continuous increase in the volume of private sector deposits during the period of the study, which resulted in a surplus in the banking liquidity, also note the level of sharp increase in the volume of deposits after 2003 due to the impact of some of the economic changes was reception of the most important banks in Jordan streamed deposits from Iraq after the occupation. It also notes that there is an increase in the level of credit facilities during the period of study, with the exception of the period between 2008 and 2009, and attributed this decline to the impact of the global financial crisis, which led to a slowdown in economic growth in that period. ufema on interest rates on credit facilities noted the central bank in recent periods ( ) to reduce interest rates on credit facilities through the exercise of monetary policy, which was characterized as an expansionist policy, and the central bank resorted to them to work to pump more liquidity into the national economy out of the state of the slowdown in the pace of growth the wake of the global financial crisis in 2008, which resulted in the wake of the mortgage and the accompanying global liquidity crunch crisis. As it can be seen from the table of interest rates on bank deposits ratios, where the notes lower levels significantly, especially after 2003, due, according to some economic analyzes to the presence of excess liquidity within the banking system, especially after an outflow of deposits from Iraq after the occupation (mind, Mufleh, 2005). Finally, we note from Table interest rates on certificates of deposit, and is worth noting that the central bank had decided in 2009 to stop issuing certificates of deposit in response to the fallout from the global financial crisis and in order to pump more cash into the national economy (Central Bank of Jordan, the annual report, 2009 ). With regard to indicators of activity Amman Stock Exchange during the study period of has been made clear in the table (5-2), and you notice the change in the market value of the Amman Stock Exchange during the study period, we find that the highest value in 2007 due to higher most of the companies share prices listed and 245 numbering was listed 18 new companies in 2007, as well as a number of existing companies to increase their capital, and then began after the impact of the global financial crisis with the beginning of 2008, where he appeared to influence cast a shadow over the market value, which saw most Arab and world stock markets and a decline in their performance during the years 2008 and As can be seen from the table (2-5) the trading of the three sectors of the market size (financial, services, industry), has been included in 2008 the highest volume trading volume has increased by about 64% from 2007, and after that trading volume in 2009 decreased by about 53% from the previous year. With respect to the price index is likely the stock market value during the study period, 2005 saw the highest increase due to increased stock market activity in that period, and was the best in terms of levels of performance indicators for the stock market since the founding of the stock market and this growth is due, according to some economic analyzes to strong performance of public shareholding companies, where profits rose during the first three quarters of 2005 increased by 103% with the continued flow of Arab and foreign investments (ASE, annual report, various issues). Table 2-5: Activity indicators Amman Stock Exchange during the years Share turnover The price index of stocks likely market value Initial versions of the value of the market Volume Market capitalization of the Stock Exchange the year

10 The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan) 303 Share turnover The price index of stocks likely market value Initial versions of the value of the market Volume Market capitalization of the Stock Exchange the year Market value of the Stock Exchange Year (Million dinars) Volume the value of the versions of the primary market The price index of stocks likely market value Share turnover Source: Amman Stock Exchange, Annual Report, various issues for the years Considering for the years 2008 and 2009, we note the significant decline in the price index of the stock market value is likely due to the fallout from the global financial crisis during that period. Seen from the table the value of the primary market versions of the Amman Stock Exchange during the study period, which reflected the great activity in the market Secondary in 2005 on the initial market activity by stimulating the establishment of new companies as well as encourage existing companies to increase their capital and in light of the availability of liquidity among investors due to rising stock prices, as well as to increase the demand for investment stocks due to higher revenues, and the figure above note the size of the noticeable improvement in the primary market in 2006, where the market rose for the first versions by 111.6% from its level in 2005, the highest level since the founding of the Amman stock Exchange, where it was during this year's listing of 26 new companies. Finally, we note from the table (2-5), the turnover rate of the shares at the Amman Stock Exchange during the study period. Test Hypotheses The study aims to test the impact of activity on the activity of the banking system ASE: test hypotheses can be summarized on the model of the decline of the banking system activity on the market value of the ASE variables using simple linear regression analysis and multiple linear regression results are as follows: 1. The results showed regression analysis Simple Simple Regression when you take all the views for each variable independently of the existence of significant effect between each of the variables of the banking and variable market value device activity in the Amman Stock Exchange: credit facilities (PC) and the average interest rates on bank deposits (DI) and Average interest rates on credit facilities prices (CI), which was specifically transaction value of R2 (0.85, 0.46, 0.58), respectively, and indicates the level of statistical significance of the test F (0.000) to reject the null hypothesis and the alternative hypothesis was accepted on the basis that the linear relationship between the change in the each of the credit facilities to the private sector and the average interest rate on bank deposits and the price of the average interest on bank facilities prices (loans) on the market value at the Amman Stock Exchange moral statistically, while the afternoon there were no significant correlation between the average interest rates on certificates of deposit in the banking system and the value market in the Amman Stock Exchange, as the value of the correlation coefficient (0.02), and indicates the level of statistical significance F (0.657), to accept the premise of the lack of linear relationship between the change in the average interest rates on certificates of deposit in the banking system and the market value at the Amman Stock Exchange.

11 304 Marwan Mohammad Abu Orabi 2. Multiple regression analysis showed Regression Multiple when estimating the impact of the independent variables (combined) of the activity of the banking system on the market value at the Amman Stock Exchange the following results: 2 R = F = Sig = DW = Inferred that the independent variables of the activity of the banking system interprets the combined 91% of the changes in market value, the size of the Amman Stock Exchange and other variables are not covered in the model explain 91%, which is reflected in the coefficient of determination (R2), and indicates F test which is used to test the causal relationship between the dependent variable and variables independent combined into a linear relationship between the dependent and independent variables combined variable, as the value of F calculated (32.017), the largest of Tabulated value (2.66) and this is confirmed by the statistical significance of the coefficient of determination level (.000). The test indicates Durbin - Watson Durbin-Watson to the absence of autocorrelation Autocorrelation problem between the values of the limits of errors, reaching statistical (DW = 2.002). The main writing equation multiple regression model as follows: SEmv T = Sig = = PC CD.I DI CI ( 2.206) ( 5.009) ( 1.287) ( 0.423) ( ) ( 0.046) ( 0.000) ( 0.221) ( 0.679) ( 0.033) Down transaction values are the values of (T) calculated and it is compared with the value of T spreadsheet (2.145) If the value of (T) calculated <T spreadsheet indicates that the existence of a relationship between an independent variable dependent variable and indicates statistical significance Sig smaller level of (0.05) significantly variable and reliability in the forecasting process. In order to assess the impact of the independent variables (combined) of the activity of the banking system on the market value at the Amman Stock Exchange was the introduction of all the independent variables together and using multiple regression method of Multiple Regression. Chapter Six Findings and Recommendations Results This study was to determine the effect of activity of the banking system on the activity of the Amman Stock Exchange, and identify the most important variables and the most able to predict and that the application of a number of variables in the Amman Stock Exchange activity and the activity of the banking system for the period of m and using a style of simple linear regression Simple Linear Regression multiple regression multiple regression multiple regression gradual Stepwise Multi regression, the study build and refine the model predictive in order to predict the market value at the Amman Stock Exchange as the dependent variable and determining the independent variables in the activity of the moral of the banking system statistically and have the ability to predict the one hand, and to predict the size of private sector deposits in the machine banking as a dependent variable in order to determine the independent variables in the activity of Oman and moral statistically Stock Exchange and have the ability to predict the other. The study of data through statistical analysis of the study data and test hypotheses to the following conclusions: 1. Results of the study showed a correlation relationship statistically significant between the activity of the banking system variables (individual) and the activity of the Amman Stock Exchange as measured by market value, and are as follows:

12 The Impact of the Banking System on the Growth of the Capital Market (Case of Jordan) 305 A and no statistically significant difference between the credit facilities to the private sector in the banking system relationship on the one hand and the size of the market capitalization in the ASE on the other hand, as indicated the results of simple regression analysis that 94% of the market value changes in the Amman Stock Exchange can be interpreted through the facilities variable credit to the private sector in the banking system. B the lack of a statistically significant relationship between the average interest rates on certificates of deposit in the banking system on the one hand and the size of the market capitalization in the ASE on the other hand, has reached the level of statistical significance of the test F (0.099), and suggests that the linear relationship between the change in the Average interest rates on certificates of deposit and the market value at the Amman Stock Exchange were not significant statistically and therefore accept the premise of nihilism linear relationship between the change in the average interest rate on certificates of deposit and market value in the Amman Stock Exchange rates, and based on proven values and the tendency resulting from regression analysis shows that the average interest rates on certificates of deposit does not affect the size of the market capitalization in the ASE in a positive way. C and no statistically significant relationship between average interest rates on bank deposits in the banking system on the one hand and the size of the market capitalization in the ASE on the other hand, as indicated the results of simple regression analysis that 43% of the changes in the size of market capitalization in the ASE can be explained during the average interest rate on bank deposits in the banking system variable prices. D and no statistically significant relationship between the average interest rate on banking facilities prices in the banking system on the one hand and the size of the market capitalization in the ASE on the other hand, as indicated the results of simple regression analysis that 54% of the changes in market value, the size of the Amman Stock Exchange can be explained during the average interest rate on banking facilities in the banking system variable prices. Recommendations Here are the recommendations reached by this study: 1. Greater transparency and disclosure by providing all the information in the stock market free of charge and published on the internet. 2. The need for the central bank through its management of monetary policy in Jordan under the guidance of cash surpluses with the banking system to invest in the stock market, as well as the enactment of laws that will encourage the entry of banks into the financial market and working to organize a sound investment environment to maintain economic stability indicators such as maintaining acceptable inflation. 3. Work to take advantage of electronic products, both in the banking business, or what is known as e-banks and in the work of the stock exchange in terms of electronic trading and disclosure of data and the deal-making operations, where the consequent increase the efficiency and effectiveness of the work of both the banking system and the stock exchange. 4. The central bank to encourage banks to expand in the granting of credit, especially in periods of economic recession, which works to activate the Amman Stock Exchange, where the results of this study showed a correlation extrusive and strong between each of the credit facilities and market value in the Amman Stock Exchange.

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