“…We proceed recursively, in the spirit of what proposed by Chapelle and Szafarz (2007) 8 , bottom-up from ownership of single companies.…”
Section: Transitivity Of Control and Consolidation Of Voting Rightsmentioning
confidence: 99%
“…We build on previous literature when we introduce our network framework, which considers the concentration, the transitivity and the consolidation of voting rights in webs of interlocking assemblies of shareholders (Levy and Szafarz, 2017;Levy, 2011;Chapelle and Szafarz, 2007;Crama and Leruth, 2007). However, our purpose is to extract corporate control structures from original shareholding activity, whereas previous works intended to study the corporate power of agents within already assigned control structures.…”
Section: Introductionmentioning
confidence: 99%
“…Chapelle and Szafarz (2007) apply an algorithm similar to ours on already de…ned corporate boundaries, to assess the power of companies inside the boundary. Our scope is di¤erent.…”
In this contribution, at …rst, we introduce a basic network framework to study pyramidal structures and wedges between ownership and control of companies. Then, we apply it to a dataset of 53.5 million of companies operating in 208 countries. Among others, we detect a strong concentration of corporate power, as less than 1% of parent companies collect more than 100 subsidiaries, but they are responsible for more than 50% of global sales. Therefore, we show that the role of indirect control, i.e., through middlemen subsidiaries, is relevant in 15% of domestic and 54% of foreign subsidiaries. Among foreign companies, cases emerge of blurring nationality, when control paths cross more than one national border, in the presence of multiple passports (19.1%), indirectly foreign (24.5%), and round-tripping subsidiaries (1.33%). Finally, we relate indirect control strategies to country indicators of the institutional environment. We …nd that pyramidal structures arise less likely in the presence of good …nancial and contractual institutions in the parent's country, as these foster more transparent forms of corporate governance. Instead, parent companies choose indirect control through countries of subsidiaries that have better …nancial institutions, possibly because it is easier to coordinate decisions from remote. Finally, we …nd that o¤shore …nancial centers are preferred jurisdictions for middlemen subsidiaries, probably due to a lower taxation and a lack of …nancial disclosure.
“…We proceed recursively, in the spirit of what proposed by Chapelle and Szafarz (2007) 8 , bottom-up from ownership of single companies.…”
Section: Transitivity Of Control and Consolidation Of Voting Rightsmentioning
confidence: 99%
“…We build on previous literature when we introduce our network framework, which considers the concentration, the transitivity and the consolidation of voting rights in webs of interlocking assemblies of shareholders (Levy and Szafarz, 2017;Levy, 2011;Chapelle and Szafarz, 2007;Crama and Leruth, 2007). However, our purpose is to extract corporate control structures from original shareholding activity, whereas previous works intended to study the corporate power of agents within already assigned control structures.…”
Section: Introductionmentioning
confidence: 99%
“…Chapelle and Szafarz (2007) apply an algorithm similar to ours on already de…ned corporate boundaries, to assess the power of companies inside the boundary. Our scope is di¤erent.…”
In this contribution, at …rst, we introduce a basic network framework to study pyramidal structures and wedges between ownership and control of companies. Then, we apply it to a dataset of 53.5 million of companies operating in 208 countries. Among others, we detect a strong concentration of corporate power, as less than 1% of parent companies collect more than 100 subsidiaries, but they are responsible for more than 50% of global sales. Therefore, we show that the role of indirect control, i.e., through middlemen subsidiaries, is relevant in 15% of domestic and 54% of foreign subsidiaries. Among foreign companies, cases emerge of blurring nationality, when control paths cross more than one national border, in the presence of multiple passports (19.1%), indirectly foreign (24.5%), and round-tripping subsidiaries (1.33%). Finally, we relate indirect control strategies to country indicators of the institutional environment. We …nd that pyramidal structures arise less likely in the presence of good …nancial and contractual institutions in the parent's country, as these foster more transparent forms of corporate governance. Instead, parent companies choose indirect control through countries of subsidiaries that have better …nancial institutions, possibly because it is easier to coordinate decisions from remote. Finally, we …nd that o¤shore …nancial centers are preferred jurisdictions for middlemen subsidiaries, probably due to a lower taxation and a lack of …nancial disclosure.
“… D13: As defined by Chapelle and Szafarz (2007), effective control is obtained by applying a majoritization rule to the matrix of direct voting rights (in this case matrix A ). The matrix of direct effective control C = ( c ij ) is thus given by:…”
Today, the shareholding structure of companies is sometimes so complex that it can be difficult to find back their actual owners and controllers. In particular, in continental Europe and in Asia, control tunnelling appears frequently through pyramidal structure. After describing the ownership structure through a graph association, this paper analyses the voting game at stake in the race for control. It compares existing methods and algorithms to identify the owners and controllers of a firm in a pyramidal structure without cross-ownership. As a real life example, the case of the Belgian retail company, Colruyt, is used to apply these different methods and compare their results. Furthermore, it shows how the ownership structure allows to the Colruyt family to keep the control of Colruyt even if there are discordances inside the family.
JEL Classification: G32, L22
“…Full control is allocated to any shareholder who reaches the voting right threshold. After this first step, the method proceeds by consolidating indirect shareholdings thanks to the algorithm proposed by 1 Chapelle and Szafarz (2007).…”
In this global world many firms present a complex shareholding structure with indirect participation, such that it may become difficult to assess a firm's controllers. Furthermore, if there are numerous dominant shareholders, the control can be shared between them. Determining who has the most influence often is a difficult task. To measure this influence, game theory allows modeling voting game and computing the Banzhaf index. This paper first offers a new algorithm to compute this index in all structures and suggests some modelisations of the floating shareholder. Then, our model is applied to a real case study: The French Group Lafarge. This exemplary case demonstrates how the float's structure and hidden coalition can impact the power relationship between dominant shareholders. Abstract:In this global world many firms present a complex shareholding structure with indirect participation, such that it may become difficult to assess a firm's controllers. Furthermore, if there are numerous dominant shareholders, the control can be shared between them. Determining who has the most influence often is a difficult task. To measure this influence, game theory allows modeling voting game and computing the Banzhaf index. This paper first offers a new algorithm to compute this index in all structures and suggests some modelisations of the floating shareholder. Then, our model is applied to a real case study: The French Group Lafarge. This exemplary case demonstrates how the float's structure and hidden coalition can impact the power relationship between dominant shareholders. JEL Classifications: C63, G32, L22
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