RIYADH, 3 May — Concentration of shares in the hands of a few, influence peddling by majority shareholders, lack of transparency in the stock market and poor performance of some firms have stifled the growth of joint stock companies, according to a study conducted by the Riyadh-based Consulting Center for Finance and Investment. The study was published in the latest issue of CCFI’s "Saudi Economic Report."

Of the 10,165 companies registered with the Ministry of Commerce at the end of 2000, 6,553 were limited liability partnerships. Of these, only 116 were joint stock companies. However, the number of JSCs listed on the Saudi stock market was only 76, or just one percent of the total number of registered companies, the study said.

It pointed out that share concentration in families has led to the shrinking of shareholders’ base. "This increases their share of ownership while reducing the number of shareholders in the company. This trend is clear in the banking sector and also in some other sectors. Strong ownership position enables these business groups to exercise some influence on the management of these companies through board representation."

Referring to the small shareholder base, the study cited Saudi Hollandi Bank, which has 685 shareholders, and Advanced Electronics Industries with 102 shareholders. Fitaihi, a Jeddah-based jewelry firm, has 24 shareholders, whereas Maadin has 21. This concentration of shares in the hands of a few comes in the way of democratic functioning of the shareholders’ general assembly.

Another negative factor, according to the study, is the lack of transparency in operations.

"Once the company’s management is influenced by some interested people, the management will reveal fewer information. Thus the company loses one of its most important feature — transparency. "This is regrettable as companies in important sectors like banking or petrochemicals may also skimp on information to the detriment of the society at large."

As a result of these factors, only 77 companies are represented in the Saudi stock market.

"More companies can be listed only if more JSCs are formed. However, we find the number of JSCs being formed is too low year after year. During 1999, for example, only three companies were set up, while in 2000 the number increased marginally to five."

One of the factors retarding the growth of the joint stock companies may have been the shortage of qualified manpower faced by the Commerce Minstry to handle the process, the study added.