Controlling firms through the majority voting rule

Ariane Chapelle and Ariane Szafarz

Physica A: Statistical Mechanics and its Applications, 2005, vol. 355, issue 2, 509-529

Abstract: Pyramids, cross-ownership, rings and other complex features inducing control tunnelling are frequent in the European and Asian industrial world. Based on the matrix methodology, this paper offers a model for measuring integrated ownership and threshold-based control, applicable to any group of interrelated firms. In line with the theory on pyramidal control, the model avoids the double counting problem and sets the full control threshold at the conservative—but incontestable—majority level of 50% of the voting shares. Any lower threshold leads to potential inconsistencies and leaves the observed high level of ownership of many dominant shareholders unexplained. Furthermore, the models leads to ultimate shareholders’ control ratios consistent with the majority voting rule. Finally, it is applied to the Frère Group, a large European pyramidal holding company known for mastering control leverages.

Keywords: Majority voting rule; Pyramidal ownership; Corporate control; Corporate governance (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (58)

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Journal Article: Controlling firms through the majority voting rule (2005)
Working Paper: Controlling firms through the majority voting rule (2005)
Working Paper: Controlling firms through the majority voting rule (2005)
Working Paper: Controlling firms through the majority voting rule (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:355:y:2005:i:2:p:509-529

DOI: 10.1016/j.physa.2005.03.026

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