Abstract
As passive investment through index funds and Exchange Traded Funds (ETFs) has become pervasive, the structure of corporate control in the global capital market is more complex than before. We propose a new model and calculation algorithm to measure a shareholder’s power to control corporations in the global economy. Our method takes into account how fragmented voting rights attached to dispersed ownership may be consolidated to generate corporate control. Analyzing the ownership holdings in 49 million companies worldwide by 69 million shareholders in 2016, we find that the landscape of global corporate control appears differently if we adequately evaluate indirect influence via dispersed ownership. In particular, a larger portion of corporate control appears to be concentrated in the hands of sovereign governments than has been recognized before. Yet, such governmental capacities are “hidden” if we use the conventional method. Moreover, financial institutions appear to not be as powerful as emphasized before. These results point to important financial and political risks both for scholars and policymakers.
Highlights
Understanding the structure of corporate control in the global capital market is increasingly important for managing financial and political risks, upstream and downstream alike
We introduce a new measure, the Network Power Index (NPI), that maps equity ownership to corporate control, explicitly taking into account the possibility that centralized voting behavior among dispersed shareholders converts fragmented ownership into corporate control
We propose the network power index (NPI) to measure the influence that each investor i has on any specific company j in a networked society
Summary
Understanding the structure of corporate control in the global capital market is increasingly important for managing financial and political risks, upstream and downstream alike To achieve their socially responsible investments, for example, investors must identify to which corporations, and their economic activities, her “responsibility” extends downstream through the ownership network. Our empirical analysis is not limited to any particular type of corporations, sector of industry, or geographical region It encompasses individual, governmental, and corporate shareholders in any type of company in the global capital market. The final section gives conclusions with implications for future research
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
