Brokers in beneficial ownership: A network approach

Abstract

We investigate beneficial ownership networks from 1999 to 2018 and find the presence of the small-world phenomenon, which fosters the participation of shareholders and public firms in beneficial ownership events. The small-world phenomenon is also associated with the presence of brokers, which are nodes that bridge shareholders with other shareholders and targets. Moreover, the beneficial ownership network is shaped by star nodes, that is, nodes that have many adjacent nodes, most of which are not connected to each other. Although star nodes affect the presence of the small-world phenomenon, there is weak evidence in support of the association of star nodes with the participation of shareholders and public firms in beneficial ownership events or with the probability of brokers' presence. Furthermore, we find that cash-on-hand and firm size seem to have the most significant impact on the probability of brokers' presence in the beneficial ownership network.