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Control consolidation with a threshold: an algorithm

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  • Ariane Chapelle
  • Ariane Szafarz

Abstract

Control tunnelling over firms can be reached through pyramids, cross-ownership, and other complex features. This phenomenon is frequent in Europe and in Asia. However, the theoretical literature has not yet converged toward a well-defined and robust measurement of integrated control that takes into account the threshold for control as applied in practice. Based on graph theory, this paper aims at filling this gap and proposes a new algorithm for evaluating the control tunnelling exerted by the firms' ultimate shareholders. Then, the paper discusses the various forms of control existing next to voting shares, like multiple voting rights, board representation and active monitoring, before suggesting ways to include them into the modelling of control.

Suggested Citation

  • Ariane Chapelle & Ariane Szafarz, 2006. "Control consolidation with a threshold: an algorithm," Working Papers CEB 06-007.RS, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:06-007
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    References listed on IDEAS

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    1. Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting out Tunneling: An Application to Indian Business Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 121-148.
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    Cited by:

    1. Armando Rungi & Gregory Morrison & Fabio Pammolli, 2017. "Global ownership and corporate control networks," Working Papers 07/2017, IMT Institute for Advanced Studies Lucca, revised Sep 2017.
    2. Marc Levy, 2006. "Control in Pyramidal Structures," Working Papers CEB 06-023.RS, ULB -- Universite Libre de Bruxelles.
    3. Jan Hanousek & Evžen Kočenda, 2011. "Rozsah integrovaného státního vlastnictví a vliv firemní kontroly na výkonnost českých podniků [Extent of the Integrated State Ownership and Effect of the State Control on Performance of Czech Firm," Politická ekonomie, Prague University of Economics and Business, vol. 2011(1), pages 82-104.
    4. Marc Levy & Ariane Szafarz, 2017. "Cross-Ownership: A Device for Management Entrenchment?," Review of Finance, European Finance Association, vol. 21(4), pages 1675-1699.
    5. Levy, Marc, 2011. "The Banzhaf index in complete and incomplete shareholding structures: A new algorithm," European Journal of Operational Research, Elsevier, vol. 215(2), pages 411-421, December.
    6. Marc Levy & Ariane Szafarz, 2011. "Corporate Control with Cross-Ownership," Working Papers CEB 11-053, ULB -- Universite Libre de Bruxelles.
    7. Evžen Kočenda & Jan Hanousek, 2012. "State ownership and control in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 157-191, August.
    8. Marc Lévy, 2010. "La «Pax Electrica» a-t-elle réduit le contrôle de Suez sur Elia, le transporteur belge d’électricité?," Revue Finance Contrôle Stratégie, revues.org, vol. 13(4), pages 139-159, December.
    9. Evžen Kočenda & Jan Hanousek, 2012. "State ownership and control in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 157-191, August.

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    More about this item

    Keywords

    Ownership; Corporate control; ultimate shareholder.;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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