Econophysics Analysis identifies the world’s top 10 most powerful companies

Thursday Feb 12, 14:34PM

James Glattfelder and Stefano Battiston at the Swiss Federal Institute of Technology in Zurich performed a study of the control and ownership of stockmarkets in 48 countries around the world. Their results are startling.

It turns out that the insight gained from a simple network analysis - that ownership and control is distributed over large numbers of people - is entirely misleading. When new factors, such as the way ownership changes as shares are bought and sold, are included, it turns out that stock markets are controlled by a very small number of companies.

Glattfelder and Battiston have even identified the companies with the greatest power in each of the stockmarkets they study. They have even created a list of global powerbrokers, the companies that are influential in the most stock markets around the world. Here is the top 10:

The Capital Group Companies
Fidelity Management & Research
Barclays PLC
Franklin Resources
AXA
JPMorgan Chase & Cp
Dimensional Fund Advisors
Merrill Lynch & Co
Wellington Management Company
UBS

Thanks to arXiv blog who comment on this one.

Abstract:

We present a methodology to extract the backbone of complex networks in which the weight and direction of links, as well as non-topological state variables associated with nodes play a crucial role. This methodology can be applied in general to networks in which mass or energy is flowing along the links. In this paper, we show how the procedure enables us to address important questions in economics, namely how control and wealth is structured and concentrated across national markets. We report on the first cross-country investigation of ownership networks in 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. This result has previously not been reported, as it is not observable without the kind of network analysis developed here.

Get the Paper from arXiv.