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Backbone of complex networks of corporations: The flow of control


Battiston, Stefano; Glattfelder, James B (2009). Backbone of complex networks of corporations: The flow of control. Physical review. E, 80(3):036104.

Abstract

We present a methodology to extract the backbone of complex networks based on the weight and direction of links, as well as on nontopological properties of nodes. We show how the methodology can be applied in general to networks in which mass or energy is flowing along the links. In particular, the procedure enables us to address important questions in economics, namely, how control and wealth are structured and concentrated across national markets. 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.

Abstract

We present a methodology to extract the backbone of complex networks based on the weight and direction of links, as well as on nontopological properties of nodes. We show how the methodology can be applied in general to networks in which mass or energy is flowing along the links. In particular, the procedure enables us to address important questions in economics, namely, how control and wealth are structured and concentrated across national markets. 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.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Physical Sciences > Statistical and Nonlinear Physics
Physical Sciences > Statistics and Probability
Physical Sciences > Condensed Matter Physics
Scope:Discipline-based scholarship (basic research)
Language:English
Date:8 September 2009
Deposited On:24 Nov 2020 14:47
Last Modified:23 Jun 2024 01:45
Publisher:American Physical Society
ISSN:2470-0045
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1103/PhysRevE.80.036104
Official URL:https://journals.aps.org/pre/abstract/10.1103/PhysRevE.80.036104
Related URLs:http://arxiv.org/abs/0902.0878
Other Identification Number:merlin-id:9880
  • Content: Published Version