The power of corporate control in the global ownership network

Abstract

As passive investment through index funds and Exchange Traded Funds (ETFs) has become pervasive, the structure of corporate control in the global capital market is more complex than before. We propose a new model and calculation algorithm to measure a shareholder’s power to control corporations in the global economy. Our method takes into account how fragmented voting rights attached to dispersed ownership may be consolidated to generate corporate control. Analyzing the ownership holdings in 49 million companies worldwide by 69 million shareholders in 2016, we find that the landscape of global corporate control appears differently if we adequately evaluate indirect influence via dispersed ownership. In particular, a larger portion of corporate control appears to be concentrated in the hands of sovereign governments than has been recognized before. Yet, such governmental capacities are “hidden” if we use the conventional method. Moreover, financial institutions appear to not be as powerful as emphasized before. These results point to important financial and political risks both for scholars and policymakers.