Global ownership and corporate control networks

Armando Rungi, Gregory Morrison () and Fabio Pammolli ()
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Gregory Morrison: University of Houston

No 07/2017, Working Papers from IMT School for Advanced Studies Lucca

Abstract: In this contribution, at first, we introduce a basic network framework to study pyramidal structures and wedges between ownership and control of companies. Then, we apply it to a dataset of 53.5 million of companies operating in 208 countries. Among others, we detect a strong concentra- tion of corporate power, as less than 1% of parent companies collect more than 100 subsidiaries, but they are responsible for more than 50% of global sales. Therefore, we show that the role of indirect control, i.e., through middlemen subsidiaries, is relevant in 15% of domestic and 54% of foreign subsidiaries. Among foreign companies, cases emerge of blurring nationality, when control paths cross more than one national border, in the presence of multiple passports (19.1%), indirectly for- eign (24.5%), and round-tripping subsidiaries (1.33%). Finally, we relate indirect control strategies to country indicators of the institutional environment. We find that pyramidal structures arise less likely in the presence of good financial and contractual institutions in the parent's country, as these foster more transparent forms of corporate governance. Instead, parent companies choose indirect control through countries of subsidiaries that have better financial institutions, possibly because it is easier to coordinate decisions from remote. Finally, we find that offshore financial centers are preferred jurisdictions for middlemen subsidiaries, probably due to a lower taxation and a lack of financial disclosure.

Keywords: ownership; corporate control; multinational enterprises; financial networks; financial institutions; offshore; economic entrenchment (search for similar items in EconPapers)
JEL-codes: C63 C71 F23 F36 G32 G34 L14 (search for similar items in EconPapers)
Pages: 37
Date: 2017-09, Revised 2017-09
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published in EIC working paper series

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