Ownership networks and corporate control
This project is related to our research line: Ownership networks.
Duration 47 months (November 2006 - September 2010)
Funding source Olsen Ltd., Zurich (Switzerland)
This project addresses the following challenging research questions: Who holds the most control in our globalised world? How is economic control distributed globally? To what degree are the top economic actors interconnected with each other?
The project analyses such questions at various levels. First of all, we develop a formal model that serves as framework to tackle issues pertaining to real-world systems. We present a methodology to extract the backbone of complex networks based on the weight and direction of links, as well as on nontopological properties of nodes. The next level consists in the validation of such model on actual data sets.Remarkably, we show how the methodology can be applied in general to networks in which mass or energy is flowing along the links.
Our cross-country investigation of ownership networks - focusing on the stock markets of 48 countries around the world - confirms the results reported in the literature on corporate control, namely, that in Anglo-Saxon countries control tends to be dispersed among numerous shareholders. On the other hand, it also reveals that in the same countries, control is found to be highly concentrated at the global level, i.e. lying in the hands of very few important shareholders. Interestingly, the exact opposite is observed for European countries.
In addition, we observe that the global network of corporations displays a peculiar topology, reflects the flow of control across agents: the "bow-tie''. We find that the most powerful actors are interconnected in a tightly-knit group, thus aligning their interests and behaving as a single economic super-entity, with implications for market competition and financial systemic risk.
We also develop models of network evolution that are able to reproduce the emergence of bow-tie topologies and the economic "super-entity'', by allowing the economic agents to maximise their level of control.
Among the major deliverables of the project, there are several publications and talks, press coverage, and the graduation of one doctoral candidate.