Large Shareholder’s Identity With Linguistic World and Stock Price Synchronicity: Evidence From a MENA Market and the Way Languages Affect Them

Abstract

I investigate the association between large shareholder’s identity and stock price synchronicity in a country where investor applying for languages is really lows protection is weak. My results show that stock prices in Jordan have synchronous behavior especially when the firm is large, consistent with previous empirical evidence on stock price behavior in low per capita GDP countries. Most of the public corporations are owned and controlled by families thus language exchanges such as speaking, reading and listening. In most of the family-controlled firms, the controlling family is also involved in firm’s management leading to loose separation between ownership and management. Furthermore, stock prices of family-controlled firms are significantly less synchronous while those of government controlled firms are more synchronous than stock prices of widely held corporations. The pyramid structure is the most widely used indirect control mechanism in languages world and results in little deviations between ownership and control.