How ownership structure in family vs non-family firms affects agency costs: A study of corporate governance in a MENA market

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Abstract

This study investigates the relationship between corporate ownership and agency costs in an emerging market characterized by prevalence of family-owned public corporations. The sample includes 69 non-financial firms listed on Amman Stock Exchange (ASE) over the period 2010–2021. The analysis is based upon comparing between family and non-family firms using alternative panel data estimation methods to address potential endogeneity concerns. The results show low levels of agency costs in both family and non-family firms. Furthermore, we find a negative association between the ownership percentage of the largest owner in both family and non-family-owned firms and agency costs. Managerial ownership is also negatively related to agency costs, but only for family-owned firms. This implies that large shareholders provide effective monitoring of management in family firms only, while managers and shareholders’ interests tend to be aligned regardless of the identity of the largest shareholder. Lastly, this study provides policy implications on the role of corporate ownership structure in a less developed country with small economy.

Keywords: Agency Costs, Family Ownership, Non-Family Firms, Ownership Concentration, Managerial Ownership, GMM

Authors’ individual contribution: Conceptualization — M.T. and A.B.; Methodology — M.T. and A.B.; Software — M.T. and R.M.; Validation — M.T., A.B., and R.M.; Formal Analysis — M.T.; Investigation — A.B. and R.M.; Resources — M.T. and R.M.; Data Curation — A.B. and R.M.; Writing — Original Draft — R.M.; Writing — Review & Editing — M.T. and A.B.; Visualization — M.T.; Supervision — M.T.; Project Administration — M.T., A.B., and R.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C33, G3, G32, G34

Received: 09.02.2025
Revised: 24.03.2025; 30.06.2025
Accepted: 28.07.2025
Published online: 01.08.2025

How to cite this paper: Tayeh, M., Bino, A., & Mustafa, R. (2025). How ownership structure in family vs non-family firms affects agency costs: A study of corporate governance in a MENA market. Journal of Governance & Regulation, 14(3), 93–104. https://doi.org/10.22495/jgrv14i3art9