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Corporate Control with Cross-Ownership

Marc Levy (marc0levy@gmail.com) and Ariane Szafarz

No 11-053, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Cross-ownership breaks the traditional rule of one-sided corporate control. Using a novel approach based on stochastic voting processes, this paper proposes a general method to determine control stakes in the presence of cross-ownership. It offers a generalization of the Banzhaf index, which allows coping with cross-ownership-inclusive ownership graphs. The original feature of this approach is its absolute sequentiality. We also operationalize this new approach by building an algorithm, which determines the shareholders’ respective control powers in any corporate structure. From a governance viewpoint, we emphasize that cross-ownership may act as a powerful device for shareholders’ expropriation. To make this point, we revisit the leading example of the German Allianz Group.

Keywords: ownership and control; cross-ownership; tunneling; Banzhaf index; Allianz group (search for similar items in EconPapers)
JEL-codes: C71 D72 D74 G32 G34 (search for similar items in EconPapers)
Pages: 41 p.
Date: 2011-11
New Economics Papers: this item is included in nep-cdm and nep-cfn
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