PSX is dominated by 31 influential families, report says

Pakistan Stock Exchange

Lahore, 5th May: Pakistan Stock Exchange (PSX) market is dominated by 31 influential families.

Baaghi TV: A study by the Pakistan Institute of Development Economics (PIDE) has revealed that only 31 families dominate the Pakistan Stock Exchange.

It has also come into notice that the boards of directors of KSE-100 index companies are mostly the people close to these families, some of whom are their employees.

According to the Express Tribune, in 2018, when data was collected, 31 households dominated the KSE 100. PIDE Vice-Chancellor, Dr. Nadeem-ul-Haq and Amin Hussain’s study have shown these results.

This thesis sheds light on corporate groups in the study market and their ownership in the stock market and secondly how the company board examines the influence of the owner and his family on the company structure and professional management.

This article points out that the families have a lot of influence in the business, which is why there are so many irregularities in the haphazard privatization.

It seems that when Mehboob-ul-Haq spoke of dominating Pakistan over 22 families in 1967, almost 50 years later, the stock market is now dominated by 31 families.

The boards include such individuals – corporate, business founders and families, retired and current members of the civil service and the military. In other words, it is tantamount to membership of the Elite Club in Pakistan.

This article challenges the notion that the stock market is a reflection of a strong economy and a vibrant financial sector in Pakistan.

He added that the boards of directors for KSE 100 companies are all connected in small groups, with some members serving as go-but vanes through membership on multiple boards, or as part of identifiable family groups.

Pakistan’s stock market makes headlines, sometimes due to record highs, which are considered “the best-performing markets in the region, and sometimes in the news due to crashes.” It is said that KSE has been given an overwhelming majority with the 10 largest companies accounting for more than half of the total market share.

Their annual reports show that the total market capitalization of directors or key shareholders is more than Rs 4.963 trillion out of Rs 6.8 trillion.

The KSE 100 market cap is very largely owned by a few large investors. The single largest shareholder is the Government of Pakistan.

All in all, the top 10 owners have 37% of the market capitalization of SEE 100. Ownership of KSE100 can be acquired by 374 entities, but in reality, the market is affected by 31 families.

Foreign shareholders and government ownership estimates are at 61. KSE100 is the bulk of market capitalization ownership.

Multinational companies are the largest type of shareholders in the KSE 100, usually representing a holding subsidiary with a foreign principal and a local subsidiary. Collectively, the KSE 100 Index is owned by firms.

MNC owns about 41%, whether in foreign holding companies or other foreign entities, each holding more than 5% of the shares. A small percentage live at about 30%.

Board Members

The study focuses largely on the boards of companies listed on the stock exchange.

Board members are an interconnected group with a lot of information flow and contacts. According to the study, they are made up of a large group of bankers, accountants and former corporate professionals, mainly from Karachi.

There are 880 positions of 100 firms in the index and these positions have been filled by 756 individuals, some of whom have multiple positions.

The Securities and Exchange Commission of Pakistan (SECP) and the Corporate Governance Code require independent directors.

Here is a little explanation of what “free” means. In many companies, independent directors are longtime employees of the owners and their ‘independence’ in board decisions is questionable.

Women make up only 10% of the board members in Pakistan and a significant number of executive directors have served as government employees in the past, whether they are bureaucrats, in the military, or in regulatory bodies such as the SECP.

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