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An Empirical Comparison of the Performance of Classical Power Indices

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  • Leech, D.

Abstract

This paper assesses the indices against a set of reasonable criteria in terms of shareholder voting power and the control of the corporation in a large cross section of British companies. Each company is a separate voting body and there is much variation in the distribution of voting shares among them. Moreover reasonable criteria exist against which to judge the indices. New algorithms for the Shapley-Shubik and Banzhaf indices are applied to detailed data on beneficial ownership of 444 large UK companies without majority control.

Suggested Citation

  • Leech, D., 2000. "An Empirical Comparison of the Performance of Classical Power Indices," The Warwick Economics Research Paper Series (TWERPS) 563, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:563
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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp563.pdf
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    References listed on IDEAS

    as
    1. Pohjola, Matti, 1988. " Concentration of Shareholder Voting Power in Finnish Industrial Companies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(2), pages 245-253.
    2. repec:hrv:faseco:30747162 is not listed on IDEAS
    3. Philip Straffin, 1977. "Homogeneity, independence, and power indices," Public Choice, Springer, vol. 30(1), pages 107-118, June.
    4. Roth, Alvin E., 1977. "Utility functions for simple games," Journal of Economic Theory, Elsevier, vol. 16(2), pages 481-489, December.
    5. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    6. 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.
    7. repec:cup:apsrev:v:48:y:1954:i:03:p:787-792_00 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Leech, Dennis, 2010. "Power Indices in Large Voting Bodies," The Warwick Economics Research Paper Series (TWERPS) 942, University of Warwick, Department of Economics.
    2. Edwards, Jeremy S.S. & Weichenrieder, Alfons J., 2009. "Control rights, pyramids, and the measurement of ownership concentration," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 489-508, October.
    3. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2013. "Quantifying the Coordinated Effects of Partial Horizontal Acquisitions," CEPR Discussion Papers 9536, C.E.P.R. Discussion Papers.
    4. Balsmeier, Benjamin & Bermig, Andreas & Dilger, Alexander, 2013. "Corporate governance and employee power in the boardroom: An applied game theoretic analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 51-74.
    5. Elisabeth Mueller, 2008. "Benefits of control, capital structure and company growth," Applied Economics, Taylor & Francis Journals, vol. 40(21), pages 2721-2734.
    6. Dennis Leech, 2003. "Computing Power Indices for Large Voting Games," Management Science, INFORMS, vol. 49(6), pages 831-837, June.
    7. Leech, Dennis, 2002. "Power Indices As An Aid To Institutional Design : The Generalised Apportionment Problem," The Warwick Economics Research Paper Series (TWERPS) 648, University of Warwick, Department of Economics.
    8. 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.
    9. Roger D. Congleton, 2015. "On the Evolution of Organizational Governance: Divided Governance and Survival in the Long Run," Working Papers 15-25, Department of Economics, West Virginia University.
    10. Matteo Migheli, 2016. "Measuring Representativeness in Different Electoral Systems, Using Italian and Dutch Data," Group Decision and Negotiation, Springer, vol. 25(4), pages 723-748, July.
    11. Algaba, E. & Bilbao, J.M. & Fernandez, J.R., 2007. "The distribution of power in the European Constitution," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1752-1766, February.
    12. Jeremy Edwards & Alfons J. 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.
    13. Agnieszka Szczypinska, 2018. "Who Gains More Power in the EU after Brexit?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(1), pages 18-33, February.
    14. Leech, D., 2001. "Fair Reweighting of the Votes in the EU Council of Ministers and the Choice of Majority Requirement for Qualified Majority Voting during Successive Enlargements," The Warwick Economics Research Paper Series (TWERPS) 587, University of Warwick, Department of Economics.
    15. Dennis Leech & Robert Leech, 2006. "Voting power and voting blocs," Public Choice, Springer, vol. 127(3), pages 285-303, June.
    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.
    17. Changxia Ke & Florian Morath & Anthony Newell & Lionel Page, 2016. "Too big to prevail: Coalition formations in the presence of a superpower," QuBE Working Papers 044, QUT Business School.
    18. Fabrice Barthélémy & Mathieu Martin, 2006. "Analyse spatiale du pouvoir de vote : application au cas de l'intercommunalité dans le département du Val d'Oise," THEMA Working Papers 2006-17, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    19. Leech, Dennis, 2002. "Computation of Power Indices," The Warwick Economics Research Paper Series (TWERPS) 644, University of Warwick, Department of Economics.
    20. Frédéric Bobay, 2001. "La réforme du Conseil de l'Union européenne à partir de la théorie des jeux," Revue Française d'Économie, Programme National Persée, vol. 16(2), pages 3-61.
    21. Madeleine Hosli & Rebecca Moody & Bryan O’Donovan & Serguei Kaniovski & Anna Little, 2011. "Squaring the circle? Collective and distributive effects of United Nations Security Council reform," The Review of International Organizations, Springer, vol. 6(2), pages 163-187, July.

    More about this item

    Keywords

    INDEXES ; GAMES ; VOTING ; SHAREHOLDERS;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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