Journal of Accounting, Finance & Management Strategy, Vol. 13, No. 2, Dec.

2018, 1-22

The Impact of Changes in the Elements of Cash Flows

Statement on Stock Returns in Jordanian Commercial
Banks Listed on Amman Stock Exchange: An Empirical
Study

Mohyedin Hamza1*, Muna Mohammad Jaradat2**

Abstract

This study examines the impact of changes in the elements of cash

flows statement on stock returns in Jordanian commercial banks listed on
Amman Stock Exchange during the period 2009 – 2015. The population of
the study was 13 commercial banks with 91 observations. The dependent
variable was Stock Returns while the independent variables were change
in combined activities of cash flows, change in operating cash flow, change
in investing cash flow, and change in financing cash flow. Also the
researcher used control variables which are bank’s size, bank’s
performance, and bank’s financial leverage. The secondary data collected
from reports and financial statements. Data have been analyzed by using
correlation analysis, ordinary least squares (OLS) regressions and analysis
of variance (ANOVA) to test hypotheses, and to answer the question of the
study and reach their goals. The study results indicate that the change in
cash flows from operating activities and change in cash flows from
investing activities have a positive significant impact on stock returns.
Also, the study shows that the changes in cash flows from financing
activities do not have a significant impact on stock returns. Furthermore,
the bank’s performance, bank’s size, and financial leverage have a
significant impact on stock returns. Based on the results, the researcher
recommends that the change in cash flows should be taken into account,
and use cash flows statements in the evaluation of the banks.

1
Associate Professor, Department of Accounting, Faculty of Economics and
Administrative Science, Zarqa University* E-mail: mohy.hamza@yahoo.com
2
Researcher, P.O. Box 3415, Zarqa 13111, Jordan.**
E-mail: munajaradatco@hotmail.com

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Hamza. M., Muna Mohammad Jaradat

Keywords: Cash flows statement, Cash flows from operating activities

(OCF), Cash flows from investing activities (INVCF), Cash flows from
financing activities (FINCF), Stock returns, Earnings per share (EPS),
Jordanian commercial banks.

JEL Classification: G1, G21, M40

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

1. Introduction

Stock returns are the most important factors that influence the
investment decision making for investors and users of financial statements;
the main element that attracts an investor is to get high returns (Saeedi &
Ebrahimi, 2010). While investment on stocks, investors should make
studies for market behavior. On the other hand, they should realize factors
that affect investment to avoid any results not compatible with their
business which is the main goal for investors is return and enhancing
profit. Although the level of stock prices in an entity is affected by other
factors such as market conditions, market performance, and risk rate while
the main factor is cash return that depend on success and stability of the
entity (Purnamasari, 2015). The investment decisions are taken by users of
financial statements and require evaluating of the firm ability to generating
cash .The cash flow statement provides financial information that could
evaluate the firm's capability of generating positive cash flow in the future
and its profit distribution (Al-Khalaileh, 2013).

2. Research Methodology

2.1 Research Problem:

The reason for the study to demonstrate the impact of changes in the
elements of the cash flows statement on stock returns is that the investors
expect high returns and stock price from the investment. The cash flows
statement includes financial information presented in a detailed manner
and is divided into three activities (Operating, Investing, and Financing),
which will help the financial statement users to make investment decision.
On the other hand, the annual financial reports provide full information
that reflects the performance of the bank to predict the stock price and
trading rate in the financial market, which affects investors returns.

So, the problem of the study is prepared to answer the two main
following questions:

Q.1- Is there an impact of changes in the elements of cash flows

statements combined on stock returns (EPS) in Jordanian
Commercial Banks listed on Amman Stock Exchange (ASE)?

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Hamza. M., Muna Mohammad Jaradat

This first question is divided into the following Sub- questions:

Q.1-1. Is there an impact of changes in cash flows from operating activities

on stock returns (EPS) in Jordanian commercial banks listed on
(ASE)?
Q.1-2. Is there an impact of changes in cash flows from investing activities
on stock returns (EPS) in Jordanian commercial banks listed on
(ASE)?
Q.1-3. Is there an impact of changes in cash flows from financing activities
on stock returns (EPS) in Jordanian commercial banks listed on
(ASE)?

Q.2- Are there differences on the impact of changes in the elements of

cash flow statements on stock returns in Jordanian commercial
banks listed on ASE attributed to three control variables (size,
performance & financial leverage)?

This second question is divided into the following Sub- questions:

Q.2-1. Are there differences on the impact of changes in the elements of cash
flow statements on stock returns in Jordanian commercial banks listed
on ASE attributed to bank size?
Q.2-2. Are there differences on the impact of changes in the elements of cash
flow statements on stock returns in Jordanian commercial banks listed
on ASE attributed to bank performance?
Q.2-3. Are there differences on the impact of changes in the elements of cash
flow statements on stock returns in Jordanian commercial banks listed
on ASE attributed to bank financial leverage?
2.2 Research hypotheses

This study examined the following two main hypotheses to achieve

the objective of the study:

H01: There is no significant impact ( a ≤ 0.05 ) of the changes in

elements of cash flows statements combined represented by
( OCF , INVFC & FINCF) on stock returns (EPS) of Jordanian
commercial banks listed on Amman Stock Exchange (ASE).

The first main hypothesis is divided into the following Sub-

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

hypotheses:

H011: There is no significant impact ( a ≤ 0.05 ) of the changes of cash flows

from operating activities on stock returns (EPS) of Jordanian
commercial banks listed on Amman Stock Exchange (ASE).
H012: There is no significant impact ( a ≤ 0.05 ) of the changes of cash flows
from investing activities on stock returns (EPS) of Jordanian
commercial banks listed on Amman Stock Exchange (ASE).
H013: There is no significant impact ( a ≤ 0.05 ) of the changes of cash flows
from financing activities on stock returns (EPS) of Jordanian
commercial banks listed on Amman Stock Exchange (ASE).

H02: There are no differences ( a ≤ 0.05 ) on the impact of changes in

the elements of cash flow statements on stock returns in
Jordanian commercial banks listed on ASE attributed to three
control variables (size, performance & financial leverage).

The second main hypothesis is divided into the following Sub-

hypotheses:

H021: There are no differences ( a ≤ 0.05) on the impact of changes in the

elements of cash flow statements on stock returns in Jordanian
commercial banks listed on ASE attributed to the bank size.
H022: There are no differences ( a ≤ 0.05 ) on the impact of changes in the
elements of cash flow statements on stock returns in Jordanian
commercial banks listed on ASE attributed to the bank performance.
H023: There are no differences (a ≤ 0.05) on the impact of changes in the
elements of cash flow statements on stock returns in Jordanian
commercial banks listed on ASE attributed to the bank financial
leverage.

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Hamza. M., Muna Mohammad Jaradat

2.3 Study model:

Independent Variables Dependent Variable

Elements of Cash flows Statement: Stock

1. Change of Cash flows from operating activities. Returns:
2. Change of Cash flows from investing activities. Earnings
3. Change of Cash flows from financing activities. per share

4. Change of Cash flows from combined activities. (EPS)

Control Variables:

1. Bank’s Size.

2. Bank’s performance.

3. Bank’s Financial Leverage.

Figure 1. The model of the study

(Diagram was prepared by the researcher.)

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

2.4 Research objectives

The objectives of the study are as follows:

(1) To identify the impact of cash flows from operating activities, cash flows
from investing activities and cash flows from financing activities.
(2) To identify the impact of stock returns.
(3) To examine the impact of changes in the elements of cash flows
statement on stock returns.
(4) To analyze and test the changes in the elements of cash flows statement.

2.5 Research significance:

Based on discussion on the theoretical framework of the study the

researcher look at prior referenced in terms of articles, books and the
websites in an attempt to add to the current theoretical studied an
contribute to the Arab bookshops on the impact of changes in the elements
of cash flows on stock returns on Jordanian banks at the ASE. The findings
of this study would be important to future researchers and academicians by
acting as a source of reference for future researches. Furthermore, the
study findings will provide insight to shareholders, managers, suppliers,
lenders, and potential investors on the impact of changes in the elements of
cash flows statements on stock returns in Jordanian banks at the ASE. This
would aid internal and external users on financial statements banks in
determining levels of cash flows that will reduce and handle the degrees of
risks resulted from the financial policy adopted by Jordanian banks. It will
also help investors to make finance and investment decisions in which the
bank's stock to invest in.

3. Literature Review

3.1 Previous studies:

3.1.1 Ernayani & Robiyanto (2016), the Effect of the Cash Flows, Gross
Profit and Company Size on Indonesian Stock Returns (A Study on the
Chemical and Basic Industry Companies during the Periods of 2009-
2014):

This study examines empirically the effect of the cash flows (the
operating cash flow; the investment cash flow; and the financing cash

7
Hamza. M., Muna Mohammad Jaradat

flow), gross profit, and company size towards the Indonesian Chemical and
Basic Industry Companies’ Stock Returns. The independent variables were
the operating cash flow, investing cash flow, financing cash flow, gross
profit, and company size, while the dependent variable was stock returns.
The study found several results: Firstly, the operating cash flow, financing
cash flow, gross profit and the size of the company have an effect on stock
returns. Secondly, the investment cash flow has no effect on stock returns.
On the other hand, the cash flows, gross profit and the size of the company
have an effect on stock returns simultaneously.

3.1.2 Kanani et.al. (2014), the Relation between Changes of Cash Flow
Statements Components and Market Value of Accepted Companies in
Tehran Stock Exchange:

This study examine the relationship between changes in the

components of cash flow statement and market value changes of accepted
companies in Tehran Stock Exchange from 2001-2004. The sample
selected of 267 firms by simple random sampling and using two-variable
regression and multiple-variable regression. The independent variables
were the operating cash flows statement’s components (operating
activities, return on investment, tax on income, investment, and financing
activities), and the dependent variable was Market value changes in the
firm. The result showed that the changes in component of cash flow don’t
have any significant correlation with market value of the companies. One
of the factors for the lack of such relationship between these variables is
non-efficiency of Iran's stock exchange market and higher volatility of the
independent variable versus dependent variable.

3.1.3 Novianti et al. (2012), The Influence of Cash Flow Changing and
Profit Accounting to Stock Return in Manufacturing Companies
Listed on the Indonesia Stock Exchange:

This study investigate the impact of cash flow components change

and accounting profit in manufacture companies’ stock returns on
Indonesia Stock Exchange. The independent variables were change in cash
flows from operating activities, change in cash flows from investing
activities, change in cash flows from financing activities, and accounting
profit while the dependent variable was stock returns. The data were
collected from financial statements and reports and analyses by using
multiple linear regressions. The results showed that the change in cash

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

flows from investing activities and accounting profit have a positive

significant impact on stock returns. On the other hand, the change in cash
flow from operating activities and change in cash flow from financing
activities don’t have a significant impact on sock returns.

3.2 Theoretical Background

3.2.1 Cash Flow Statement:

The statement of cash flows reports on the cash inflows (receipts) and
outflows (payments) that occurred at an entity in a specific period
(Albrecht et al., 2007, P.615.). According to Albrecht (2003), cash flows
are an index to the actual money that is received by or paid out for certain
time period of a firm.

Cash flow information assists its financial statement users in

obtaining the relevant information that contains details of operating,
investing, and financial activities concerning the use and source of
practically the entire financial resources over a given time period (Rose et
al., 2007). Also, Cash flows statement contained information that is
important to shareholders, suppliers, and creditors as well as other
stakeholders to business entity; cash flows statement helps company to
evaluate the ability of generating future positive cash flows (Knechel et al.,
2007). In addition, it helps firms to expand or maintain capacity of
operations, also it shows whether of activities investing have been financed
either internally (Current assets consist of cash or anything that can easily
be converted into cash or working capital management) or externally (bank
loans or seeking external investors) (Knechel et al., 2007). The researcher
indicate that the practice of forecasting future cash flows is a scenario in
which several benefits are determined, including predicting the amount,
timing and uncertainty of future cash flows. This provides simple and clear
conditions for people who have an interest in investing in business entities
by knowing the financial situation (Mulford & Comiskey, 2005).

Thus, Cash flow statement is classified into three activities:

(1) Cash flow from operating activities.
(2) Cash flow from investing activities.
(3) Cash flow from financing activities.

Discuss and explain the activities of cash flow statements:

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Hamza. M., Muna Mohammad Jaradat

(1) Cash flow from operating activities:

Operating activities: Is cash flow resulting from producing activities
of the entity and other activities that are not investing or financing
activities (Mackenzie et al., 2012). Furthermore, (Epstein &
Jermakowicz, 2010) expressed that operating activities include the
production, sales and delivery of the company's product as well as
collecting payment from its customers. This could include purchasing
raw materials, building inventory, advertising, and shipping the product.
(2) Cash flow from investing activities:
Investing activities: are cash flow resulting from activities of the
entity that relate to acquisition and disposal of long term assets (such as
property, plant and equipment) and other noncurrent assets (including
investments) other than those included in cash equivalents (Mackenzie et
al., 2012). Also, they implicate cash advances and collections on loans
made to other entities. This, however, does not implicate loans and
advances made by banks.
(3) Cash flow from financing activities:
Financing activities: Is cash flow resulting from activities that result
in changes in the size and composition of the equity capital and
borrowings of an entity (Mackenzie et al., 2012). Furthermore, IFRS
(2015) cash flows from financing activities are an indicator of likely
future interest and dividend payments

3.2.2 Stock Returns:

Return: profit on capital investment or securities (Ross et al., 2013).

It is expected that efficient companies will perform better in their

work than other companies, and this fact will be reflected in market prices
(Kanani et al., 2014). Current studies indicated that stock returns consider
the event affects the stock price determination, and recent studies have
shown that the share price changes before the announcement of a particular
event (Mukora, 2014). Therefore, stock prices reflect all public and private
information that the investor in particular makes in order to make a
decision about investing in this company, as well as that it benefits the
users of the financial statements in general (Mukora, 2014).

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

3.2.3 Control variables:

Consistent with prior studies, the study employed three control

variables namely; Bank’s size, bank’s performance and bank’s financial
leverage. Bank’s size measured as the natural logarithm of firm’s total
assets. Ngunjiri (2010), found earnings volatility and size of the firm
significantly explained stock price movements at the Nairobi Stock
Exchange. Local studies have indicated a positive relationship between
firm size and stock performance (Kalui, 2004; Ngunjiri, 2010). Bank
performance is another control variables are defined as very important
evaluation; performance used to measure the achievement of company
goals and financial and operational performance. ROA is calculated by
dividing net profit after taxes by total assets (Menaje, 2012). Anwaar
(2016), examined the impact of firms performance on stock returns
(evidence from listed companies of FTSE-100 index London, UK), the
result shows that ROA has a significant positive impact on stock returns.
Leverage is another control variable that is defined as ratio that is used for
the evaluation of financing policy. It shows how creditors and shareholders
can handle the degree of risk because of this financing policy. According to
Mirza et al. (2016), while they investigate about financial leverage and
stock returns : evidence from an emerging economic, using a
comprehensive set of firms listed on the Karachi Stock Exchange ,they
found that leverage have important implications for financial manager,
investment analysts and other market participants who use asset pricing
framework for investment appraisals. Buigut, Soi, Koskei & Kibet (2013)
also found debt had a significant positive effect on share prices of energy
listed companies at the Nairobi Stock Exchange.

4. Research Design and Variables Measurement

4.1 Study Sample

This study comprises of all Jordanian commercial banks listed on

Amman Stock Exchange which is 13 banks during the period 2009 to
2015.

4.2 Data Collection

The data were collected from the annual reports and financial
statements disclosed in the banks websites that will help in achieving the

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Hamza. M., Muna Mohammad Jaradat

objectives of the research.

4.3 Variables measurement

4.3.1 The Independent Variable: Elements of Cash Flow

The study used Horizontal analysis to measure the changes of

elements of cash flows for each activity of cash flows (operating, investing
and financing) consistent with (Kanani et al., 2014), as follows:

Changes Ratio= ((Current Year – Previous Year)/Previous Year) ×100% (1)

This ratio is used to give us the amount of changes that happened for
multiple periods of time for the same account. To analyze the change ratio
I separate the positive change and negative change, which means if the
banks have positive changes rated one (1) and, if not rated zero (0).

4.3.2 The dependent Variable: Stock Returns

The study used Earning per share (EPS) to measure stock returns
depending on (IAS 33) as follows:

EPS: Net Income minus Preferred Dividends divided by Weighted

Average Common Shares outstanding (Mackenzie et al., 2012).

EPS = Net Income – Preferred Dividends /Weighted Average Numbers of

Common Shares Outstanding (2)

4.3.3 The control variables:

(1) Bank Size: there are different ways for measuring bank size. The study used
total assets as a measure of bank Size depending on (Tariverdi et al., 2014),
the researcher predicts a positive impact between bank size and stock returns.

(SIZE it)= Log of current year total Assets it (3)

(2) Financial Leverage: of Bank i in the year t (Gibson, 2009).

Debt Ratio = (Total debt / Total assets) ×100% (4)

(3) Bank performance: is expected to have a positive impact with cash flows
measuring by Return on Assets (Frank et al., 2014).

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

ROA it = (Net Income / Average Total Assets) × 100% (5)

5. Analyses and Discussion

5.1 Descriptive Statistics

A descriptive statistics for all study variables was run as depicted in

table (1) and table (2). Particularly, table (1) presents the descriptive
statistics for the study variables regarding 91 Banks - year observations
related to (13) commercial banks listed on Amman Stock Exchange during
the period (2009-2015) where the stock return measured by earnings per
share (EPS), which presents the portion of a bank's profit allocated to each
outstanding share of common stock, ranges from 0.01 to 0.52 with an
average of 0.216. Furthermore, financial leverage, which showed the
proportion of bank’s assets that are financed through debt, varies from
0.7804 to 0.935 with an average of 0.854. Moreover, return on assets
which are considered an indicator of how profitable a company is relative
to its total assets and gives an idea as to how efficient management is at
using its assets to generate earnings, ranges from -0.17 to 2.51 with an
average of 1.267.Whereas, the bank’s size ranges from 19.52 to 23.98 with
an average of 21.37.

Table 1. Descriptive Statistics for the study variables

Variable N Minimum Mean Maximum Std. Deviation

SIZE 91 19.5200 21.370220 23.9800 1.0055501

LEV 91 .7804 .854192 .9350 .0296072

ROA 91 -.1700 1.267143 2.5100 .4997628

R 91 .0100 .216264 .5200 .1394883

Note: Table (1) presents a descriptive statistics for the study variable regarding 91 bank -year
observations of 13 commercial banks listed on Amman Stock Exchange during the
period (2009-2015): R is Stock Returns of Bank i in the year t., measured by EPS = Net
Income – Preferred Dividends /Weighted Average Numbers of Common Shares
Outstanding; SIZE is Size of bank i in the year t. measured as Ln of current year total
Assets; Lev is Financial Leverage of bank i in the year t. measured as Debt Ratio = Total
debt / Total assets; ROA is Performance of bank i in the year t. measured as ROA it = Net
Income / Average Total Assets.

Table (2) depicts the frequency distribution for the changes in

elements of cash flows statement, represented by cash flows from
operating activities, cash flows from investing activities and cash flows

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Hamza. M., Muna Mohammad Jaradat

from financing activities of 13 commercial banks listed on ASE during the

period (2009-2015).

Table 2. Frequency distribution for dummy variables

Variable OCF INVCF FINCF
Changes Frequency Percent Frequency Percent Frequency Percent
Positive 29 31.9 32 35.2 29 31.9
Negative 62 68.1 59 64.8 62 68.1
Total 91 100.0 91 100.0 91 100.0

The table depicts that 31.9% of the observations showed that banks
are enjoyed positive changes in cash flows from operating activities during
the study period and thus 68.1% of the observations showed that banks
suffered from negative changes in cash flows from operating activities.
Furthermore, 35.2% of the observations showed that the changes in cash
flow from investing activities are positive and 64.8% of the observations
indicated that changes in cash flow from investing activities are negative.
In addition, the changes in cash flows from financing activities for 31.9%
of the observations are positive and for 68.1% of the observations are
negative.

5.2. Correlation matrix

Table (3) provides the correlation coefficients between the study

variables. As can be observed from table (3) there are significant positive
correlation coefficients between OCF, INVCF and stock returns

Table 3. Correlation between explanatory variables

Variable OCFD INVCFD FINCFD SIZE LEV ROA
OCFD 1
INVCFD .040 1
FINCFD .089 -.059 1
SIZE .118* .063 -.116 1
LEV .080 -.090 -.026 .174 1
ROA -.036 .051 -.053 .259** .190* 1

Note: Table (3) presents Pearson correlation coefficients for the explanatory variables regarding 91
bank- year observations of 13 commercial banks listed on Amman Stock Exchange during the
period (2009-2015):
OCF is The change in Cash Flow from Operating activities of bank i in the year t., which
takes 1 if the bank has positive changes and 0 if bank has negative changes; INVCF The

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

change in Cash Flow from Investing activities of bank i in the year t., which takes 1 if the
bank has positive changes and 0 if bank has negative changes; FINCF The change in Cash
Flow from Financing activities of bank i in the year t, which takes 1 if the bank has positive
changes and 0 if bank has negative changes; SIZE is Size of bank i in the year t. measured as
Ln of current year total Assets; Lev is Financial Leverage of bank i in the year t. measured as
Debt Ratio = Total debt / Total assets; ROA is Performance of bank i in the year t. measured
as ROA it= Net Income / Average Total Assets.
** Significant at the 0.01 level (2-tailed).
* Significant at the 0.05 level (2-tailed).

5.3. Results Discussion

5.3.1 Ordinary Least Squares (OLS)

Table (4) depicts the results of OLS regression which aims to examine
the impact of changes in the elements of cash flows statement on stock
returns of Jordanian commercial banks listed on Amman Stock Exchange
taking into consideration bank’s performance, bank’s size, and financial
leverage.

Table 4. OLS Regression Results

Variable Beta Coefficients T value Sig.
OCFD .182 3.000 .004**
INVCFD .153 2.531 .013*
FINCFD -.152 -2.500 .014*
SIZE .520 8.433 .000**
LEV .149 2.435 .017*
ROA .486 8.092 .000**
Constant -7.498 .000
F value= 32.487 Durbin-Watson = 1.562
Sig.= 0.000 Adj-R2 = .677

Note:The table provides OLS regression results for the main regression model of the study
regarding 91 bank- year observations. The model is: Rit = A + B1×OCFit + B2×INVCFit +
B3×FINCFit+ B4×SIZE it + B5×LEVit +B6×ROA it +Eit; Rit Stock Returns of Bank i in the
year t., measured by EPS = Net Income – Preferred Dividends /Weighted Average Numbers
of Common Shares Outstanding; OCF is The change in Cash Flow from Operating
activities of bank i in the year t. which takes 1 if the bank has positive changes and 0 if bank
has negative changes; INVCF is The change in Cash Flow from Investing activities of bank
i in the year t., which takes 1 if the bank has positive changes and 0 if bank has negative
changes; FINCF is The change in Cash Flow from Financing activities of bank I in the year
t., which takes 1 if the bank has positive changes and 0 if bank has negative changes; SIZE
is Size of bank i in the year t. measured as Ln of current year total Assets ; Lev is
Financial Leverage of bank i in the year t. measured as Debt Ratio = Total debt / Total
assets ; ROA is Performance of bank i in the year t. measured as ROA it= Net Income /
Average Total Assets.
** Significant at the 0.01 level (2-tailed).

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Hamza. M., Muna Mohammad Jaradat

* Significant at the 0.05 level (2-tailed).

As can be observed from the table, bank’s stock return measured by

earnings per share is affected positively by changes in cash flows from
operating activities at 0.05 level of significance. This outcome supports
(Ernayani & Robiyanto, 2016; Dorgham, 2008; Hamza, 2014) and
conflicts (Novianti et al., 2012 ) who provided evidence showed that stock
returns is affected negatively by changes in cash flows from operarting
activities.

Table (4) also documented that the changes in cash flows from
investing activities positively reflect the banks stock return at 0.05 level of
significance. This outcome supports (Hamza, 2014; Novianti et al., 2012)
and conflicts (Atout et al., 2010; Dorgham, 2008) who provided evidence
that showed that stock returns is affected negatively by changes in cash
flows from investing activities.

Table (4) also documented that the changes in cash flows from
financing activities negatively reflect the banks stock return at 0.05 level of
significance. This outcome supports (Hamza, 2014; Kesio, 2014) and
conflicts (Kanani et al., 2014; Ernayani & Robiyanto, 2016) who provided
evidence that showed that stock returns is affected positively by changes in
cash flows from financing activities.

The results also showed that stock return is affected positively by

bank’s size and bank’s performance, an indication that investors in large
bank size with high performance enjoyed higher earnings per share (EPS).
These results are consistent with (Ernayani & Robiyanto, 2016; Anwaar,
2016; Martani & Khairurizka, 2009; Pouraghajan et al., 2013) , and
conflicts (Maringka et al., 2016) who provided evidence that showed that
stock returns is affected negatively by bank’s size and bank’s performance.
Furthermore, the results also showed that stock return is affected positively
by financial leverage, an indication that investors in bank’s with high
financial leverage enjoyed higher earnings per share (EPS). This results
supports (Taani & Banykhaled, 2011; Buigut et al., 2013; Al Hamdony &
Al Sabihi, 2012); and conflicts ( Maringka et al., 2016) who provided
evidence that showed that stock returns is affected negatively by financial
leverage.

6. Conclusion

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 Cash Flows Statement on Stock Returns in Jordanian Commercial Banks

This paper examines the impact of changes in the elements of cash

flows statement on stock returns in Jordanian commercial banks listed on
ASE during the period (2009-2015). The results showed that the stock
returns is affected by the changes in the combined activities of cash flows
statement represented by (OCF, INVCF and FINCF) at 0.05 level of
significance. The results indicate that the earnings per share (EPS) are
affected positively with changes in cash flows from operating activities at
0.05 level of significance, This will be an advantage for investors in
predicting the amount of stock returns, the investors will look at the cash
flow report from the operating activities such as the information that can be
used for making investment decisions because it’s the activities that
generate profits from the operations of the banks. Any increase in change
in cash flows from operating activities will increase stock returns, the
investors will buy stocks of banks that in turn will increase stock returns.
Also the results indicate that earnings per share (EPS) are affected
positively with the change in cash flows from investing activities at 0.05
level of significance, this will be a good advantage to provide a cash flow
for the banks. It can help the banks to expand. It also gives an insight that
the INVCF will increase with increase in stock returns, and this will reflect
increase in cash flows generated from the investment which reflects
additional revenues. On the other hand, the results indicate that earnings
per share (EPS) are affected negatively with the change in cash flows from
financing activities at 0.05 level of significance; this result gives an
indicator that any decrease in change in FINCF will increase Stock returns.
Furthermore, the results showed that the stock returns (EPS) are affected
positively with banks’ performance, which implies that stock returns of
banks’ return on assets give an indicator about the performance of the
banks that will increase the net income which will increase their stock
returns. Also, the results showed that the stock returns (EPS) are affected
positively with banks’ size, which implies that stock returns of banks’ size
is higher in large banks than in small banks. On the other hand, the results
showed that the stock returns (EPS) are affected positively with bank’s
financial leverage, which implies that stock returns of banks financial
leverage is higher with the banks that depend on the external debt in their
business it examines that the firm uses debt financing aggressively than the
banks that depend on their internal debt (that is retained earnings). The
fund can be used to support long term growth for the firm so it can earn
profit.

The results of the study have implicit recommendations for banks

17
Hamza. M., Muna Mohammad Jaradat

paying attention to changes in the elements of cash flows in assessing

company. As well as, to use other factors that may affect stock returns
(such as voluntary disclosure, corporate governance and capital structure).
Also, the study recommends examining the changes in elements cash flows
statement on stock returns on using other sample from other sector (Such
as non-financial sectors, Industrial companies, manufacturing and service
companies).

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