Power Indices and the Measurement of Control in Corporate Structures

Crama, Yves; Leruth, Luc

doi:10.1142/s0219198913400173

Cited by 28 publications

(24 citation statements)

References 65 publications

(99 reference statements)

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“…Moreover, authors typically feel uncomfortable when it comes to drawing the practical consequences of cyclical ownership structures on governance (Crama et al, 2011). 13 Our approach fills this gap by offering a generalization of the Banzhaf index.…”

Section: Resultsmentioning

confidence: 99%

“…La Porta et al, 1999;Dorofeenko et al, 2008;Crama and Leruth, 2011;Aminadav et al, 2011) mention cross-ownership as a problem to be addressed, but no general theory properly accounts for it. In particular, the current definition of the Banzhaf (1965) index does not accommodate multiple equilibria.…”

Section: Voting Games In Corporate Structures With Cross-ownershipmentioning

confidence: 99%

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Corporate Control with Cross-Ownership

Levy

Szafarz

2012

SSRN Journal

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Cross-ownership breaks the traditional rule of one-sided corporate control. Using a novel approach based on stochastic voting processes, this paper proposes a general method to determine control stakes in the presence of cross-ownership. It offers a generalization of the Banzhaf index, which allows coping with crossownership-inclusive ownership graphs. The original feature of this approach is its absolute sequentiality. We also operationalize this new approach by building an algorithm, which determines the shareholders' respective control powers in any corporate structure. From a governance viewpoint, we emphasize that crossownership may act as a powerful device for shareholder expropriation. To make this point, we revisit the leading example of the German Allianz Group. AbstractCross-ownership breaks the traditional rule of one-sided corporate control. Using a novel approach based on stochastic voting processes, this paper suggests a general method to determine control stakes in the presence of cross-ownership. It offers a generalization of the Banzhaf index, which applies to cross-ownership-inclusive graphs. The original feature of this approach is its absolute sequentiality. Accordingly, we build a new algorithm that evaluates the shareholders' control powers in any corporate structure. From a governance viewpoint, we emphasize that cross-ownership may act as a powerful device for shareholder expropriation.To illustrate this point, we revisit the leading example of the German Allianz Group.3

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Section: Resultsmentioning

confidence: 99%

Section: Voting Games In Corporate Structures With Cross-ownershipmentioning

confidence: 99%

Corporate Control with Cross-Ownership

Levy

Szafarz

2012

SSRN Journal

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“…The following result can be derived almost immediately from Corollary 4.7 -we omit the proof. 5 Concluding remarks Crama and Leruth (2011) point out that the concepts of control -as studied in our paper -and ownership must be carefully distinguished. The following example illustrates this.…”

Section: Variable Number Of Playersmentioning

confidence: 97%

“…For a recent overview of the theoretical and empirical literature in this area see Crama and Leruth (2011).…”

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confidence: 99%

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Indirect control and power in mutual control structures

Karos

Peters

2015

Games and Economic Behavior

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In a mutual control structure agents exercise control over each other. Typical examples occur in the area of corporate governance: firms and investment companies exercise mutual control, in particular by owning each others' stocks. In this paper we formulate a general model for such situations. There is a fixed set of agents, and a mutual control structure assigns to each subset (coalition) the subset of agents controlled by that coalition. Such a mutual control structure captures direct control. We propose a procedure in order to incorporate indirect control as well: if S controls T , and S and T jointly control R, then S controls R indirectly. This way, invariant mutual control structures result. Alternatively, mutual control can be described by vectors of simple games, called simple game structures, each simple game describing who controls a certain player, and also those simple games can be updated in order to capture indirect control. We show that both approaches lead to equivalent invariant structures.In the second part of the paper, we axiomatically develop a class of power indices for invariant mutual control structures. We impose four axioms with a plausible interpretation in this framework, which together characterize a broad class of power indices based on dividends resulting both from exercising and from undergoing control. By adding an extra condition a unique power index is singled out. In this index, each player accumulates his Shapley-Shubik power index assignments from controlling other players, diminished by the sum of the Shapley-Shubik power index assignments to other players controlling him.

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