File:The Network of Global Corporate Control.pdf

Network analysis of the structure of global corporate interleaved ownerships and revenues.

 paper  by Stefania Vitali, James B. Glattfelder, Stefano Battiston dated 2011/10/26

---

Subjects: Globalisation, Corporate power
Source: PLOS One (Link)


Wikispooks Comment

---

An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of 147 companies (out of 30 million economic actors in the 2007 Orbit database) with disproportionate power over the global economy. Connectedness clusters over time and money flows towards the most highly connected members, for 'business reasons'. These findings not only contradict common book learning of how markets should behave, it has also implications for social power structures.
See Also

---

The author's video presentation of the paper

★ Start a Discussion about this document

Abstract

The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic ‘‘super-entity’’ that raises new important issues both for researchers and policy makers

Appendix

The Authors provide supporting information to the study, including Acronyms and abbreviations, Data and TNC Network Detection, Network Control, Degree and Strength Distribution Analysis, Connected Components Analysis, Bow-Tie Component Size, Strongly Connected Component Analysis, Network Control Concentration and Additional Tables. download pdf

Definition of "Control"

One meaning of control in the corporate finance literature is the frequency by which a shareholder is able to influence the firm’ strategic decision during the official voting [12]. Differently, in this work, by control we mean how much economic value of companies a shareholder is able to influence. Moreover, we did not limit our focus on the control of a shareholder of a single firm. Instead, we look at the control each shareholder has over its whole portfolio of directly and indirectly owned firms. As a result, the shareholders with a high level of control are those potentially able to impose their decision on many high-value firms. The higher a shareholder’s control is, the higher its power to influence the final decision. In this sense, our notion of control can be related to Weber’s definition of “power”, i.e. the probability of an individual to be able to impose their will despite the opposition of the others [13].

Control of Financial Institutions

90% of the top 50 of the 147 core companies that hold disproportionate power belong to the financial sector according to Table S1 of the Appendix (industry standard classification system (NACE) codes starting with 65,66,67).

Top Control Holders

Table S1. Top 50 control-holders. Shareholders are ranked by network control (according to the threshold model, TM).

1. Barclays plc (FS**) (SCC***)
2. Capital Group Companies Inc (FS)
3. FMR Corporation (FS)
4. AXA (FS) (SCC)
5. State Street Corporation (FS) (SCC)
6. JP Morgan Chase & Co (FS) (SCC)
7. Legal & General Group plc (FS) (SCC)
8. Vanguard Group Inc
9. UBS AG (FS) (SCC)
10. Merrill Lynch & Co Inc (FS) (SCC)
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation
26. Lloyds TSB Group plc
27. Invesco plc
28. Allianz SE 29. TIAA
30. Old Mutual Public Limited Company
31. Aviva plc
32. Schroders plc
33. Dodge & Cox
34. Lehman Brothers Holdings Inc*
35. Sun Life Financial Inc
36. Standard Life plc
37. CNCE
38. Nomura Holdings Inc
39. The Depository Trust Company
40. Massachusetts Mutual Life Insurance
41. ING Groep NV
42. Brandes Investment Partners LP
43. Unicredito Italiano SPA
44. Deposit Insurance Corporation of Japan
45. Vereniging Aegon
46. BNP Paribas
47. Affiliated Managers Group Inc
48. Resona Holdings Inc
49. Capital Group International Inc
50. China Petrochemical Group Company

* Lehman still existed in the 2007 dataset used

** FS: financial sector

*** SCC: strongly connected component: set of firms in which every member owns directly and/or indirectly shares in every other member.