Ownership, control, group affiliations, and wealth concentration: The case of a developing market

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Abstract

The aim of this paper is to assess ownership and control of Jordanian listed firms by identifying group affiliations, control-enhancing mechanisms, and the wealth of controlling owners. Hand-collected data for 237 firms listed on the Amman Stock Exchange (ASE) is used to identify ultimate owners, construct affiliated groups, and compute the separation between cash flow rights and control rights created by pyramid structures and cross-holdings. The findings indicate that more than one-third of listed firms are group-affiliated, the majority of listed firms are controlled by families then by foreigners and a small number of firms are controlled by the state. They also indicate that family and foreign investors use pyramids to enhance their control of business groups creating a wedge between cash flow and control rights with pronounced use of pyramids among foreign firms. In addition, the top family and foreign owners control at least 22% of corporate assets with half of this control being exercised by foreign investors originating from the Gulf region. The latter finding has important implications regarding the ongoing impact of the Arab Gulf on capital formation in the Middle East and North Africa (MENA) region.

Keywords: Ownership Structure, Cash Flow Rights, Voting Rights, Group Affiliation, Business Groups, Developing Markets

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

Acknowledgements: The Author kindly acknowledges the financial support received from the Deanship of Scientific Research (DSR), The University of Jordan under Grant No. 22/2017–2018. The DSR, The University of Jordan had no involvement in the conduct of this research or the preparation of this article. Also, the Author would like to thank participants in the conference on “The Political Economy of State Business Relations” organized by the Economic Research Forum (ERF) and École normale supérieure for providing useful comments on an earlier version of this paper circulated under the title “The Division of Ownership and Control in Listed Jordanian Firms”. All remaining errors are the Author’s.

JEL Classification: G32, L22

Received: 08.11.2021
Accepted: 14.03.2022
Published online: 15.03.2022

How to cite this paper: Tayem, G. (2022). Ownership, control, group affiliations, and wealth concentration: The case of a developing market [Special issue]. Journal of Governance & Regulation, 11(1), 376–388. https://doi.org/10.22495/jgrv11i1siart16