Corporate control and ownership networks

Abstract

In this paper, authors consider ownership networks to quantify the ease with which a company can be controlled due to the shareholding relationships in which it is involved. These networks have been usually considered in a descriptive perspective, either to quantify the control exerted by an ultimate shareholder, especially in presence of complex patterns of indirect control, or as a subject of topological analysis. Recently, a new stream of literature arose, solving optimization problems on ownership networks. Among these tools, authors explicitly refer to the Indirect Control Problem (IC) (Martins & Neves, 2017), which determines the minimum cost control strategy of a set of Target company, namely a strategy to build a robust investment fund which includes the corporate control on one or more companies. In this paper, we combine the descriptive and the optimization approach, introducing a linear programming model, namely Cheapest Control Problem (CCP), contributing on both the descriptive and the optimization approach. In particular, authors propose CCP overcome some of the IC main limitations, i.e. the overestimation of control in presence of mutual cross-shareholdings. Furthermore, CCP solutions allow computing three indexes that measure the ease with which a company can be controlled depending on its ownership relationships. Finally, a case study is incorporated to compare IC and CCP solutions, discussing the informative power of the indices introduced.