The role of the Amman Stock Exchange in Jordanian corporate governance

Abstract

The reforms adopted by the Jordanian government between 1997 and 2003 to promote and globalise the securities market in Jordan have contributed directly in the significant improvements that the Amman Stock Exchange (ASE) witnessed in all market indicators in the last decade and accordingly in reinforcing the ASE role in boosting the Jordanian economy through mobilising funds for listed companies from the public. The Securities law 1997 no. (23) and the introduction of new technology for trading and dealing in securities (Remote Electronic Trading) are considered the cornerstone of these reforms. The Securities law 1997, which set the legal framework for the key elements of the securities market, separated the regulatory function from trading and technical side of the market by establishing three independent institutions: Jordan Securities Commission (JSC), ASE and Securities Depository Centre (SDC). In this new environment, the ASE witnessed a remarkable improvement in its performance. However, the sluggish performance of the ASE after the Global Financial Crisis in 2008 to date highlights the need to review all the securities regulators roles in the Jordanian Capital Market and corporate governance in particular the role of the ASE to reform the securities market to continue its important contribution in reinforcing the Jordanian economy. The thesis discusses the role of the ASE in corporate governance in Jordan. While the ASE plays a pivotal role in the raising of much needed finance in the development of the Jordanian economy, its efficiency appears to have been hindered by its regulatory structure and institutional constraints. These include: first, the ASE institutional structure as a non-official public institution strengthens the government and JSC control over the ASE and weakens the administrative and financial autonomy of the ASE; secondly, the functional overlaps between the regulatory bodies entrusted with the oversight of the securities market with no clear demarcation and the lack of co-ordination between officials of the various regulatory bodies; thirdly, the dominance of families and government and some other obstacles such as the lack of appreciation of what corporate governance rules require, prevent listed companies from complying with corporate governance rules particularly those in the Code of Corporate Governance for Listed Shareholding Companies on the ASE 2008. This thesis examines these structural and institutional deficiencies and the constraints they impose on the operation and efficiency of the Jordanian securities market and suggests ways of overcoming them by enhancing the five fundamental elements of market structure (technology, regulation, information, participants and instruments) so as to improve the market's efficiency and appeal to investors both within and outside the Middle Eastern region. This thesis argues that privatisation of the ASE leading to its listing as a public corporation is a potential solution for some of the problems relating to the ASE's institutional structure and its operation.

Date of Award	2014
Original language	English