A Paradox in Measuring Corporate Control
37 Pages Posted: 11 Sep 2000
Date Written: July 1999
The Shapley value has been proposed as a measure of the control exercised by various shareholders of the firm. Measuring control is important in the analysis of competition in industries with significant cross ownership of shares. Unfortunately, we show that the Shapley value can generate paradoxical results when ownership interests in a corporation can be held indirectly through layered corporate entities. We illustrate the problem with a couple of simple examples based on patterns of corporate ownership in the cable industry where both layered corporate entitities and cross ownership are common.
Keywords: Corporate control, shapley value, cross ownership
JEL Classification: G3, D4
Suggested Citation: Suggested Citation