Comparison between Islamic and Non-Islamic Banks Ratios to Predict Amman Stock Exchange Banking Index

The purpose of this paper is to predict the banking sector index using financial ratios, and compare the capability of financial ratios for Islamic banks and financial ratios for non-Islamic Banks to predict the banking sector index in Amman Stock Exchange. The study used yearly data of three Islamic banks and thirteen non-Islamic banks during the period between 2005 and 2017. Ordinary least square method (OLS) has been utilized using seven financial ratios to predict the banking sector index. The findings revealed that the financial ratios can predict the banking sector index in Amman Stock Exchange. Mainly, the equity ratio (ER), debt (DR), and stock turnover (STR) of Islamic banks can predict of the banking sector index in Amman Stock Exchange. The quick ratio (QR), return on equity (ROE), return on assets (ROA), and market book value (MBR) of Islamic banks does not predict the banking sector index. In contrast, debt ratio (DR), stock turnover (STR), return on equity (ROE), return on assets (ROA), and price to book value (MBR) of non-Islamic banks can predict of the banking sector index. The equity ratio (ER) and a quick ratio (QR) of non-Islamic banks do not predict the banking sector index. Nevertheless, the findings also revealed that stock turnover ratio can predict of the banking sector index in Amman Stock Exchange for both Islamic and non-Islamic banks.