THE IMPACT OF CAPITAL ADEQUACY AND LIQUIDITY RATIOS ON THE EARNINGS QUALITY IN JORDANIAN COMMERCIAL BANKS: THE MODIFIED ROLE OF DIRECTORS BOARD CHARACTERISTICS

Objective: This study aimed to demonstrate the impact of capital adequacy (CA) and liquidity ratios (LRs) on Earnings quality (EQ) in Jordanian commercial banks (JCB), considering the moderating role of Board of Directors Characteristics (BODC). Theoretical Framework: CA reflects bank’s ability to absorb risks, safeguard deposits, LRs key measures of financial health, assess bank's ability to meet short-term obligations and maintain financial flows. While EQ indicate stability and predictive accuracy of future earnings, aiding investment decisions and enhancing financial transparency. And BODC plays a critical governance role, ensuring strategic oversight, institutional performance, and shareholder value enhancement, Characteristics like board size, gender and nationality diversity, and members' experience significantly impact decision-making and financial performance. Method: The study population included all commercial banks listed on the Amman Stock Exchange, which numbered (12) banks, where secondary data for the period (2018-2023) was relied upon in the financial reports of these banks. To analyze the data, the statistical analysis program (SPSS) was used, and the study relied on the use of descriptive inferential statistics methods. Results and Discussion: The study concluded that there is a moderating role for BODC on the impact of CA and LRs represented by (the ratio of shareholders' equity to net facilities, the ratio of net facilities to total assets, and the ratio of short-term investments to total deposits) on EQ in JCB, and the presence of a moderating role of BODC on the relationship between CA and LRs represented by (the ratio of shareholders' equity to net facilities, the ratio of net facilities to total assets, and the ratio of short-term investments to total deposits) and EQ in JCB. Research Implications: Based on these results, the study recommended the need to conduct future studies that explore the impact of other factors, other than BODC, on the impact of CA and LRs on EQ. It also recommended the need to increase supervision by the Central Bank of Jordan on CA ratios, and to urge JCB to improve LRs to enhance EQ. Originality/Value: This study contributes to the literature by identifing a positive relationship between CA and profitability. And board characteristics, particularly members’ expertise and nationality diversity, were shown to have a moderating role in the effect of CA on EQ.