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

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.