Rebuilding the Great Pyramids: A Method for Identifying Control Relations in Complex Ownership Structures

46 Pages Posted: 4 Aug 2011

See all articles by Gur Aminadav

Gur Aminadav

London Business School

Yoram Bachrach

Microsoft Corporation - Microsoft Research New England

Konstantin Kosenko

Bank of Israel

Jeffrey S. Rosenschein

The Hebrew University of Jerusalem

Yoav Wilf

The Hebrew University of Jerusalem

Date Written: June 16, 2011

Abstract

Identifying the corporate controller (controlling shareholder, ultimate owner) is an essential prerequisite for any debate on the corporate governance of a specific firm and of entire markets. This paper aims to provide a comprehensive, precise and economically sound method for identifying control relations on the corporate level and especially in complex ownership structures. We apply weighted voting games literature as a theoretical framework for our analysis and use the Shapley-Shubik and the Banzhaf power indices to determine control rights. The core element of the proposed method, distinguishing our study from others, in solving the puzzle of corporate control, is the simultaneous analysis of both the specific ownership map within the corporation and the corporate network in which the firm is embedded. We implemented our algorithm into a Java computer program and tested it on a real-world data set of corporate ownership in the Israeli market. The direct product of the analysis of these data is a comprehensive map of control relations at every time point. We find that the corporate control relations identified by our method are richer and more accurate than those provided by different official sources.

Keywords: corporate governance, control rights, corporate networks, ownership structure, power indices

JEL Classification: G31, G32, G34

Suggested Citation

Aminadav, Gur and Bachrach, Yoram and Kosenko, Konstantin and Rosenschein, Jeffrey S. and Wilf, Yoav, Rebuilding the Great Pyramids: A Method for Identifying Control Relations in Complex Ownership Structures (June 16, 2011). Available at SSRN: https://ssrn.com/abstract=1903941 or http://dx.doi.org/10.2139/ssrn.1903941

Gur Aminadav

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Yoram Bachrach

Microsoft Corporation - Microsoft Research New England ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

HOME PAGE: http://research.microsoft.com/en-us/people/yobach/

Konstantin Kosenko (Contact Author)

Bank of Israel ( email )

Bank of Israel 1
P.O. Box 780
Jerusalem, 91907
Israel
972-26552628 (Phone)
972-26669628 (Fax)

Jeffrey S. Rosenschein

The Hebrew University of Jerusalem ( email )

Jerusalem, IL

HOME PAGE: http://www.cs.huji.ac.il/~jeff

Yoav Wilf

The Hebrew University of Jerusalem ( email )

Jerusalem, IL

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