This comprehensive study explored the efficiency landscape of the Jordanian banking industry from 2006 to 2021, utilizing a dual-pronged approach. First, we assessed the efficiency scores of 15 commercial banks, comprising 13 conventional and 2 Islamic institutions, through data envelopment analysis (DEA). Secondly, we investigated the determinants influencing relative efficiency using the Tobit regression model. Our dataset, spanning 240 observations over 16 years, provides a nuanced examination of industry dynamics. DEA, specifically focusing on variable return to scale (VRS), unveils efficiency scores by accounting for scale inefficiencies. The research contributes insights into the operational efficacy of Jordanian banks and provides a robust methodology for understanding efficiency dynamics in the broader financial landscape. The results reveal significant relationships between return on assets, return on equity, GDP growth, and efficiency. Furthermore, it is noteworthy that Islamic banks demonstrate higher efficiency compared to conventional banks. Additionally, non-significant associations were observed with credit risk, bank size, and the ratio of loan loss provision over net income. The findings hold implications for policymakers, industry stakeholders, and researchers aiming to bolster the resilience and competitiveness of Jordan’s banking sector.

This paper presents a comprehensive analysis of key financial indicators influencing the operational efficiency of banks in Jordan over the period 2006 to 2021. The study, focusing on fifteen commercial banks, employs seven regression models to assess the impact of selected variables on bank operating efficiency. Our findings reveal novel insights with substantial contributions to banking practice. We identify a statistically significant influence of both bank-specific factors and temporal effects, demonstrating the nuanced dynamics shaping the operational efficiency of Jordanian banks. Notably, a positive and significant correlation is established between the operating efficiency ratio and return on assets, bank size, and the ratio of loan loss provisions to net interest income, providing valuable strategic guidance for effective management. Conversely, a significant negative relationship is observed between the operating efficiency ratio and the total expense ratio, underscoring the critical importance of careful cost management. No significant associations are found between the operating efficiency ratio and credit risk, the equity-to-asset ratio, the deposit-to-liability ratio, and the equity-to-liability ratio. This study makes a unique contribution by shedding light on these previously unexplored correlations, offering actionable insights for enhancing operational efficiency in the banking sector. Additionally, our research advocates for the Central Bank of Jordan (CBJ) to persist in adaptive policy measures, which are crucial for ongoing banking reforms and improved monitoring practices. Based on our empirical findings, these recommendations aim to fortify the resilience and adaptability of Jordan’s banking sector, contributing both academically and practically. Importantly, they reinforce the symbiotic link between a stable banking sector and sustained economic development in Jordan.