Leech, Dennis (1999) Minority control: an analysis of British companies using voting power indices. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers).

Preview

PDF WRAP_Leech_twerp529.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (471Kb)

Abstract

An exercise in the empirical use of voting power indices from cooperative game theory to applied ownership data for large companies, this paper contributes in two areas: (1) the analysis of company control based on shareholding voting power, and (2) the empirical use of power indices and understanding of the comparative properties of different indices. New algorithms for calculating power indices, which quantify voting power in weighted voting bodies like company meetings, are applied to detailed data on beneficial ownership of 444 large UK companies without majority control. The results show that the Banzhaf index is, and the Shapley-Shubik index is not, useful for this analysis and a control classification of the firms is obtained.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Cooperation, Power (Social sciences), Voting research, Game theory, Stock ownership
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	March 1999
Number:	No.529
Number of Pages:	59
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
References:	Banzhaf, J. (1965), “Weighted voting doesn’t work: a mathematical analysis,” Rutgers Law Review, vol. 19, 317-343. Coleman, J. S. (1971), “Control of collectivities and the power of a collectivity to act, “in Lieberman, ed., Social Choice, Gorden and Breach, 277-287. Cubbin, J. S. and D.Leech (1983), “The effect of shareholding dispersion on the degree of control: theory and evidence,” Economic Journal, Dubey, P. and L. S. Shapley (1979 ), “Mathematical properties of the Banzhaf power index,” Mathematics of Operations Research, 4,no. 2, May, 99-131. Hart, O. (1995), Firms, Contracts and Financial Structure, Oxford University Press. La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, (1998) "Corporate Ownership Around the World," NBER Working Paper 6625, forthcoming in the Journal of Finance. Leech, D. (1987a), "Ownership Concentration and the Theory of the Firm: a Simple-Game-Theoretic Approach," Journal of Industrial Economics, Vol. XXXV, No. 3, March 1987, 225-240. Leech, D. (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, Vol.34, No.4, April 1988, 509-527. Leech, D. (1990), "Power Indices and Probabilistic Voting Assumptions," Public Choice, vol.66, pp.293-9. Leech, D. and J. Leahy (1991), "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, vol. 101, No. 6 (November) 1991. Leech, D.(1999), “Computing Classical Power Indices for Large Finite Voting Games,” Warwick Economic Research Paper Number 510, July 1998, revised March 1999. Leech, D and Miquel Manjon (1999), "The Ownership and Control of Spanish Firms: Corporate Governance and Game Theoretic Analyses of Shareholder Power," mimeo University of Warwick. London Stock Exchange (1993), The Listing Rules, (The Yellow Book). Lucas, W F (1983), “Measuring Power in Weighted Voting Systems,” in S Brams, W Lucas and P Straffin (eds.), Political and Related Models, Springer. Milnor, J. W. and L. S. Shapley (1978), “Values of large games II: Oceanic Games,” Mathematics of Operations Research, vol. 3 ,no. 4, Nov., 290-307. Pohjola, M (1988), "Concentration of Shareholder Voting Power in Finnish Industrial Companies," Scandinavian Journal of Economics, vol. 90, no. 2, pp.245-53. Roth, A.E. (1977), “Utillity Functions for Simple Games," Journal of Economic Theory, vol.16, pp. 481-489. Rydqvyst, K. (1986), The Pricing of Shares with Different Voting Power and the Theory of Oceanic Games, Economic Research Institute, Stockholm School of Economics. Shapley, L. S. and N. Z. Shapiro (1978) “Values of large games, A Limit Theorem," Mathematics of Operations Research, Vol. 3. No. 1, pp1-9.(Formerly Values of Large Games, I: a Limit Theorem, RM –2648, The Rand Corporation, Santa Monica.) Shapley, L.S. (1961), "Values of Large Games III: A Corporation with Two Large Stockholders," RM-2650, The Rand Corporation, Santa Monica. Shapley, L. S. and M. Shubik (1954), “A method for evaluating the distribution of power in a committee system,” American Political Science Review, 48, 787-792. Short, Helen (1994), "Ownership, Control, Financial Structure and the Performance of Firms," Journal of Economic Surveys, vol.8,3, pp. 203-49. Straffin, Philip D. (1977), “Homogeneity, Independence and Power Indices,” Public Choice, vol. 30, pp.107-118. Straffin, Philip D. (1994), “Power and Stability in Politics,” in R.J.Aumann and S.J.Hart (ed.), Handbook of Game Theory (Vol. 2), Elsevier, pp. 1128-1151.
URI:	http://wrap.warwick.ac.uk/id/eprint/1649

Request changes to a record

Actions (login required)

View Item