Ownership and Control: A Small-World Analysis

33 Pages Posted: 15 Jan 2008

See all articles by Martin J. Conyon

Martin J. Conyon

Bentley University; Wharton School, Center for Human Resources

Mark R. Muldoon

University of Manchester - Department of Mathematics

Date Written: December 2007

Abstract

In this paper we investigate the ownership and control of British firms using recent techniques from computational graph theory. Specifically, we analyze the 'small-world' of ownership and control. A small-world is a network whose actors are linked by a short chain of acquaintances (short path-lengths), but at the same time have a strongly overlapping circle of friends (high clustering). We simulate a set of corporate worlds using an ensemble of random-graphs introduced by Chung and Lu (2002a,b). We find that the corporate governance network structures analyzed here are more clustered ('clubby') than would be predicted by the random-graph model. Path-lengths, though, are generally not shorter than expected. In addition, we investigate the role of financial institutions: potentially important conduits creating connectivity in corporate networks. We find such institutions give rise to systematically different network topologies.

Keywords: Small worlds, corporate governance board of directors

JEL Classification: G32, G34, G20, G15

Suggested Citation

Conyon, Martin J. and Muldoon, Mark R., Ownership and Control: A Small-World Analysis (December 2007). Available at SSRN: https://ssrn.com/abstract=1083425 or http://dx.doi.org/10.2139/ssrn.1083425

Martin J. Conyon (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

Mark R. Muldoon

University of Manchester - Department of Mathematics ( email )

Oxford Road
Manchester M13 9PL, M13 9PL
United Kingdom

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