On the Bid-Spread in The Jordanian Banking Sector: What are the Implications?

Abstract

This paper measures the bid-ask spread for all listed Jordanian banks and examines its’ determinants. Based on a total of 15 banks and the time period 2012-2014, the results show that Jordanian banks’ stocks suffer from relatively high liquidity cost. This finding has a number of implications to the banks’ cost of capital, and the behavior of their stocks’ return. In addition, unless the management of the capital market takes the issue of stock liquidity more seriously, it is argued that such listed firms (banks) might choose to cross-list their stocks or leave the local market altogether and list their stocks abroad. As expected, the objective of such a move is to improve their stocks’ liquidity and hence, realize the envisaged benefits.