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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.

Suggested Citation

  • Dennis Leech, 1988. "The Relationship Between Shareholding Concentration and Shareholder Voting Power in British Companies: A Study of the Application of Power Indices for Simple Games," Management Science, INFORMS, vol. 34(4), pages 509-527, April.
    • Handle: RePEc:inm:ormnsc:v:34:y:1988:i:4:p:509-527
    DOI: 10.1287/mnsc.34.4.509
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    References listed on IDEAS

    as
    1. Leech, Dennis, 1985. "Ownership Concentration and the Theory of the Firm: a Simple Game-Theoretic Approach Applied to US Corporations in the 1930's," Economic Research Papers 269227, University of Warwick - Department of Economics.
    2. Owen, Guillermo, 1975. "Evaluation of a Presidential Election Game," American Political Science Review, Cambridge University Press, vol. 69(3), pages 947-953, September.
    3. Leech, Dennis, 1985. "Ownership Concentration and the Theory of the Firm : A Simple-Game-Theoretic Approach to Applied US Corporations in the 1930's," The Warwick Economics Research Paper Series (TWERPS) 262, University of Warwick, Department of Economics.
    4. Guillermo Owen, 1975. "Multilinear extensions and the banzhaf value," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 22(4), pages 741-750, December.
    5. Guillermo Owen, 1972. "Multilinear Extensions of Games," Management Science, INFORMS, vol. 18(5-Part-2), pages 64-79, January.
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