Global Ownership and Corporate Control Networks

IMT Lucca EIC WP Series 07/2017

34 Pages Posted: 8 Sep 2017

See all articles by Armando Rungi

Armando Rungi

IMT School for Advanced Studies - Lucca

Gregory Morrison

University of Houston

Fabio Pammolli

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering; CERM Foundation

Date Written: July 31, 2017

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 concentration 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 foreign (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 centres 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

JEL Classification: G32; G34; F23; F36; C63; C71; L14

Suggested Citation

Rungi, Armando and Morrison, Gregory and Pammolli, Fabio, Global Ownership and Corporate Control Networks (July 31, 2017). IMT Lucca EIC WP Series 07/2017, Available at SSRN: https://ssrn.com/abstract=3031955 or http://dx.doi.org/10.2139/ssrn.3031955

Armando Rungi (Contact Author)

IMT School for Advanced Studies - Lucca ( email )

Piazza S. Francesco 19
Lucca, IT-55100
Italy

Gregory Morrison

University of Houston ( email )

4800 Calhoun Road
Houston, TX 77204
United States

Fabio Pammolli

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering ( email )

Via Lambruschini 4C - building 26/A
Milano, 20156
Italy

CERM Foundation ( email )

Via Fiorentina, 1
Siena, Siena 53100
Italy

HOME PAGE: http://www.cermlab.it

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