Factors associated with Customer Satisfaction in, and Financial Performance of, financial institutions: A Case study of Islamic and conventional banks in Jordan

Banking industry research is focused on factors impacting upon customer satisfaction about and/or financial performance of banks. Only limited studies have investigated these factors in developing countries, reporting inconsistent results. There may be different factors influencing customer satisfaction in and/or financial performance of banks in developing countries. Also, Islamic-compliance based and corporate social responsibility (CSR) factors in developing countries have been neglected. This study has three objectives. First is to investigate the set of relationships between three variables [general services, corporate social responsibility (CSR) services and Sharia’h compliance services (where applicable)] and customer satisfaction. This objective is motivated for Jordanian Islamic and Jordanian Arab conventional banks because in prior studies, some variables have either been examined with inconsistent results, only partially examined, or some variables were omitted. Results suggest significant different relationships exist between two variables - general services & CSR - and customer satisfaction with Jordanian banks (both Islamic and Arab). Sharia’h compliance services were found to contribute to customer satisfaction only for customer of Islamic banks. There is no relationship between Sharia’h compliance services and customer satisfaction in the Jordanian Arab banks because Arab banks fail to offer their customer Sharia’h compliance services. The second objective underpins an examination of four sets of relationships with two aims. The first three sets of relationships and the first aim of this objective is the individual relationships between three bank service variables [general services, CSR services and Sharia’h compliance services (where applicable)] and financial performance. When data collected from Islamic and Arab banks were analysed collectively, the regression analysis produced two significant positive results (general services and CSR services) and one positive non-significant (Sharia’h compliance services relationship) result. Data was then analysed separately and the regression analysis for responses from customer of Islamic banks produced three significant positive relationship results (general services, CSR services, and Sharia’h compliance services). The regression analysis for responses from Arab banks’ customer gave two significant positive relationship results (general services and CSR services). There is no relationship between Sharia’h compliance services and financial performance for Arab banks’ customer because Arab banks do not provide their customer with Sharia’h compliance services. The second aim of the second objective is the relationship between customer satisfaction and financial performance and forms the fourth relationship. A significant positive relationship was found to exist between customer satisfaction and financial performance in both Islamic and Arab banks. The third objective of this study is to examine the mediating effect of customer satisfaction on the individual relationships between each of three factors (general services, CSR services, and Sharia’h compliance services) and financial performance. This research establishes the direct and indirect effect of three factors [general services, CSR services, and Sharia’h compliance services (where applicable)] and financial performance. Significant or meaningful indirect (mediating) effects for each relationship were calculated using the results of the path analysis. Calculations for both Islamic and Arab banks suggest that customer satisfaction mediates the relationship between two variables (general services and CSR services) and financial performance. On the other hand, customer satisfaction does not mediate the relationship between Sharia’h compliance services and financial performance for all banks. For Islamic banks, calculations suggest that customer satisfaction mediates the relationship between three variables (general services, CSR services, and Sharia’h compliance services) and financial performance. However, in Arab banks, calculations suggest that customer satisfaction mediates the relationship between two variables (general services and CSR services) and financial performance. ; ; Submitted in the fulfilment of the requirements of the degree of Doctor of Philosophy, University of the Sunshine Coast, 2010.