By Daniel Stanton
Report from Moody's says that greater disclosure could help firms obtain finance from new sources.
Large family-owned corporates in the Gulf could benefit from greater transparency, according to a new report from ratings agency Moody's Investors Service.
The report, entitled ‘Family-Owned Corporates in the GCC', said that many large family enterprises had hidden credit strengths which may not be publicly known.
Philipp Lotter, Moody's senior credit officer and author of the report, said: "The main analytical challenges in assessing the credit quality of family-owned companies in the GCC, where such groups are commonplace, are the ownership structure and the limited public financial disclosure." The report notes that there is often a shortage of good quality financial information on private corporations in the region, perhaps due to the lack of any obligations for closely held corporations to report their results publicly.
However, it also states that these companies are often willing to share such information on a confidential basis to third parties like Moody's.
Moody's observes that many regional companies, whether privately or publicly held, are heavily reliant on short-term sources of funding, which are often primarily dependent on the strength of banking relationships. It says this trend is particularly strong among family-owned companies, but expects it to change with the development of Islamic finance and the region's capital markets.