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The Relationship Between Shareholding Concentration and Shareholder Voting Power in British Companies: A Study of the Application of Power Indices for Simple Games

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  • Dennis Leech

    (Department of Economics, Warwick University, Coventry CV4 7AL, England)

Abstract

This paper reports an analysis of the relationships between shareholding and voting power distributions in a sample of British companies. It applies two standard approaches to the measurement of power in simple games: the Shapley-Shubik and the Banzhaf power indices. The results indicate that power is more concentrated than ownership in every case. A comparison of the two indices reveals that typically the Banzhaf index gives a more concentrated power distribution. For the Shapley-Shubik index the power ratio for the largest shareholder is accurately described in terms of the size of holding and the concentration of the remainder. The corresponding Banzhaf power ratio is less dependent on these variables. There is no association between power concentration and company size.

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File URL: http://dx.doi.org/10.1287/mnsc.34.4.509
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 34 (1988)
Issue (Month): 4 (April)
Pages: 509-527

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Handle: RePEc:inm:ormnsc:v:34:y:1988:i:4:p:509-527

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Related research

Keywords: shareholding; simple games; power indices; Shapley-Shubik power index; Banzhaf power index; British companies;

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Cited by:
  1. Crama, Yves & Leruth, Luc, 2007. "Control and voting power in corporate networks: Concepts and computational aspects," European Journal of Operational Research, Elsevier, vol. 178(3), pages 879-893, May.
  2. Gary Gorton & Frank Schmid, 2000. "Class Struggle Inside the Firm: A Study of German Codetermination," Center for Financial Institutions Working Papers 00-36, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. Dennis Leech & Miguel Manjón, 2002. "Corporate Governance in Spain (with an Application of the Power Indices Approach)," European Journal of Law and Economics, Springer, vol. 13(2), pages 157-173, March.
  4. Nicodano, Giovanna & Sembenelli, Alessandro, 2004. "Private benefits, block transaction premiums and ownership structure," International Review of Financial Analysis, Elsevier, vol. 13(2), pages 227-244.
  5. Crespi, R. & Renneboog, L.D.R., 2000. "United we stand: Corporate Monitoring by Shareholder Coalitions in the UK," Discussion Paper 2000-18, Tilburg University, Center for Economic Research.
  6. Muravyev, Alexander, 2004. "The puzzle of dual class stock in Russia: Explaining the price differential between common and preferred shares," MPRA Paper 27726, University Library of Munich, Germany.
  7. Jeremy Edwards & Alfons Weichenrieder, 2004. "How Weak is the Weakest-Link Principle?On the Measurement of Firm Owners’Control Rights," CESifo Working Paper Series 1255, CESifo Group Munich.
  8. Guemmegne, Juliette & Pongou, Roland, 2013. "A Policy-Based Rationalization of Collective Rules: Dimensionality, Specialized Houses, and Decentralized Authority," MPRA Paper 46019, University Library of Munich, Germany.
  9. Berezinets, Irina & Ilina, Yulia & Muravyev, Alexander, 2011. "CEO and Board Characteristics as Determinants of Private Benefits of Control: Evidence from the Russian Stock Exchange," IZA Discussion Papers 6256, Institute for the Study of Labor (IZA).
  10. Leech, D., 2000. "Computing Classical Power Indices For Large Finite Voting Games," The Warwick Economics Research Paper Series (TWERPS) 579, University of Warwick, Department of Economics.
  11. Casajus, André & Labrenz, Helfried, 2014. "A property rights based consolidation approach," Working Papers 126, University of Leipzig, Faculty of Economics and Management Science.
  12. Edwards, Jeremy S S & Weichenrieder, Alfons J, 2009. "Control Rights, Pyramids, and the Measurement of Ownership Concentration," MPRA Paper 13830, University Library of Munich, Germany.
  13. Dennis Leech, 2002. "An Empirical Comparison of the Performance of Classical Power Indices," Political Studies, Political Studies Association, vol. 50(1), pages 1-22, 03.
  14. Leech, Dennis, 2002. "Computation of Power Indices," The Warwick Economics Research Paper Series (TWERPS) 644, University of Warwick, Department of Economics.
  15. André Casajus & Helfried Labrenz & Tobias Hiller, 2009. "Majority shareholder protection by variable qualified majority rules," European Journal of Law and Economics, Springer, vol. 28(1), pages 9-18, August.
  16. Dennis Leech, 2001. "Shareholder Voting Power and Corporate Governance: A Study of Large British Companies," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 27, pages 33-54.

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