Family-owned banks in Jordan: Do they perform better?

Abstract

Purpose: Family ownership is very common for Jordanian businesses, leading to a high level of involvement of family members in company management. There continues to be intense discussion on the pros and cons of family ownership, particularly as it focuses corporate control within a small family group. The purpose of this paper is to examine the performance of family and non-family owned banks appear on the Amman Stock Exchange over the 2016 to 2020 period.

Design/methodology/approach: The research on Jordanian domestic banks is based on data from the annual reports of banks listed on their websites which offers comprehensive data on finances, ownership and the board. Family owned and non-family banks were analysed using multiple regression technique to identify any variations in their performance.

Findings: Using a sample of 16 domestic banks with 75 bank-year observations over the 2016 to 2020 period. The study supports other research in finding that family ownership is negatively related to bank performance. This is true for accounting-based and market-based performance measures, including ROA, ROE and Tobin’s Q test results. Additionally, analysis identifies greater negative consequences for performance within family-owned banks by board of directors.

Originality/value: This paper extends previous research on family businesses by investigating the impact of family ownership on the financial performance in the Jordanian bank sector. This research determined that devaluation is a consequence of higher levels of ownership concentration for domestic banks in Jordan.