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The Saudi monarchy and economic familism in an era of business environment reforms

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  • Mazaheri, Nimah

Abstract

In recent years, Saudi Arabia has strengthened its regulatory and financial institutions and adopted many reforms concerning its business environment. Yet, Saudi Arabia seems an unlikely country to succeed at implementing business environment reforms given the presence of an authoritarian state and rent-seeking behavior from elites that is the outcome of oil wealth. What explains the ability of Saudi Arabia to initiate reforms that many states have struggled to implement or uniformly reject? This paper argues that the country's monarchical system helps the government solve the credible commitment problem with private sector elites, thereby facilitating business environment reforms. The monarchical system does this by legitimizing and reinforcing the institution of economic familism. The salience of this institution provides a reliable guarantee to private sector elites that their rents and business interests will be protected during the reform process. The case of Saudi Arabia stands as an important example of how absolute monarchies can pursue certain economic reforms, and also how an informal institution can solve the credible commitment problem in an authoritarian context where formal institutions are either absent or weak.

Suggested Citation

  • Mazaheri, Nimah, 2013. "The Saudi monarchy and economic familism in an era of business environment reforms," Business and Politics, Cambridge University Press, vol. 15(3), pages 295-321, October.
    • Handle: RePEc:cup:buspol:v:15:y:2013:i:03:p:295-321_00
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    Cited by:

    1. Al-Hadi, Ahmed & Eulaiwi, Baban & Al-Yahyaee, Khamis Hamed & Duong, Lien & Taylor, Grantley, 2020. "Investment committees and corporate cash holdings," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    2. Al-Hadi, Ahmed & Taylor, Grantley & Hossain, Mahmud, 2015. "Disaggregation, auditor conservatism and implied cost of equity capital: An international evidence from the GCC," Journal of Multinational Financial Management, Elsevier, vol. 29(C), pages 66-98.
    3. Alqahtani, Jubran & Duong, Lien & Taylor, Grantley & Eulaiwi, Baban, 2022. "Outside directors, firm life cycle, corporate financial decisions and firm performance," Emerging Markets Review, Elsevier, vol. 50(C).
    4. Al-Hadi, Ahmed & Taylor, Grantley & Al-Yahyaee, Khamis Hamed, 2016. "Ruling Family Political Connections and Risk Reporting: Evidence from the GCC," The International Journal of Accounting, Elsevier, vol. 51(4), pages 504-524.
    5. Eulaiwi, Baban & Al-Hadi, Ahmed & Taylor, Grantley & Al-Yahyaee, Khamis Hamed & Evans, John, 2016. "Multiple directorships, family ownership and the board nomination committee: International evidence from the GCC," Emerging Markets Review, Elsevier, vol. 28(C), pages 61-88.
    6. Mahmoud Agha & Baban Eulaiwi, 2020. "The alignment effects of CEO stock incentives in the presence of government ownership: International evidence from Gulf Cooperation Council countries," Australian Journal of Management, Australian School of Business, vol. 45(2), pages 195-222, May.
    7. Ahmed Mohamed Habib & Nahia Mourad, 2022. "Analyzing the Efficiency of Working Capital Management: a New Approach Based on DEA-Malmquist Technology," SN Operations Research Forum, Springer, vol. 3(3), pages 1-20, September.

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