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We report on the first cross-country investigation of ownership networks, focusing on the stock markets of 48 countries around the world. On the one hand, our analysis confirms results expected on the basis of the literature on corporate control, namely, that in Anglo-Saxon countries control tends to be dispersed among numerous shareholders. On the other hand, it also reveals that in the same countries, control is found to be highly concentrated at the global level, namely, lying in the hands of very few important shareholders. Interestingly, the exact opposite is observed for European countries. These results have previously not been reported as they are not observable without the kind of network analysis developed here.
We have developed a methodology to identify and extract the backbone of complex networks that are comprised of weighted and directed links and nodes to which a scalar quantity is associated. We interpret such networks as systems in which mass is created at some nodes and transferred to the nodes upstream. The amount of mass flowing along a link from node i to node j is given by the scalar quantity associated with the node j times the weight of the link, Wij vj . The backbone corresponds to the subnetwork in which a preassigned fraction of the total flow of the system is transferred.
Applied to ownership networks, the procedure identifies the backbone as the subnetwork where
most of the control and the economic value resides.
has been known for over 75 years that the Anglo-Saxon countries have the highest occurrence of widely held firms . The statement that the control of corporations is dispersed among many shareholders invokes the intuition that there exists a multitude of owners that only hold a small amount of shares in a few companies. However, in contrast to such intuition, our main finding is that a local dispersion of control is associated with a global concentration of control and value. This means that only a small elite of shareholders controls a large fraction of the stock market, without ever having been previously systematically reported on.
Finally, we also observe that the US financial sector holds
the seat of power at an international level. It will remain to be seen, if the continued unfolding
of the current financial crisis will tip this balance of power as the US financial landscape faces
a fundamental transformation in its wake.