Determinants of litigation risk in the Jordanian financial sector: the role of firm-specific indicators

Abstract

Purpose

This study aims to examine the impact of firm indicators on litigation risk in the Jordanian financial sector from 2017 to 2021, where the relationship between firm indicators and litigation risk in the Jordanian financial sector is a crucial area of research that can help financial institutions understand the factors that increase their probability of litigation risk.

Design/methodology/approach

The sample for this study comprised 92 publicly traded financial firms listed on the Amman Stock Exchange. The study used a quantitative research approach to analyse the relationship between four firm indicators (profitability, firm size, leverage and age) and their impact on litigation risk in the Jordanian financial sector from 2017 to 2021.

Findings

Our findings reveal that firm size has a significant positive impact on litigation risk, whereas profitability was found to have no significant impact on litigation risk. Moreover, the authors found that financial leverage substantially positively impacts litigation risk levels. However, the firm age was found to have no significant impact on litigation risk.

Originality/value

The results provide valuable insights into factors contributing to litigation risk in the Jordanian financial sector and the findings can inform strategic decisions for financial firms as they seek to manage litigation risk and improve financial performance. The study contributes to the existing literature on litigation risk by examining the impact of multiple firm indicators on litigation risk in the context of the Jordanian financial sector.

Citation

Taha, R., Taha, N. and Ananzeh, H. (2023), "Determinants of litigation risk in the Jordanian financial sector: the role of firm-specific indicators", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-05-2023-0239