IDEAS home Printed from https://ideas.repec.org/p/ags/uwarer/269334.html
   My bibliography  Save this paper

An Empirical Comparison of the Performance of Classical Power Indices

Author

Listed:
  • Leech, Dennis

Abstract

Power indices are general measures of the relative a priori voting power of individual members of a voting body. They are useful for both positive and normative analysis of voting bodies particularly those using weighted voting. This paper applies new algorithms for computing the rival Shapley-Shubik and Banzhaf indices for large voting bodies to shareholder voting power in a cross section of British companies. Each company is a separate voting body and there is much variation in ownership between them resulting in different power structures. Because the data are incomplete, both finite and “oceanic” games of shareholder voting are analysed. The indices are appraised, using reasonable criteria, from the literature on corporate control. The results are unfavourable to the Shapley-Shubik index and suggest that the Banzhaf index much better reflects the variations in the power of shareholders between companies as the weights of shareholder blocs vary.

Suggested Citation

  • Leech, Dennis, 2001. "An Empirical Comparison of the Performance of Classical Power Indices," Economic Research Papers 269334, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269334
    DOI: 10.22004/ag.econ.269334
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/269334/files/twerp563.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/269334/files/twerp563.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.269334?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dan S. Felsenthal & Moshé Machover, 1998. "The Measurement of Voting Power," Books, Edward Elgar Publishing, number 1489.
    2. Roth, Alvin E., 1977. "Utility functions for simple games," Journal of Economic Theory, Elsevier, vol. 16(2), pages 481-489, December.
    3. Pradeep Dubey & Lloyd S. Shapley, 1979. "Mathematical Properties of the Banzhaf Power Index," Mathematics of Operations Research, INFORMS, vol. 4(2), pages 99-131, May.
    4. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    5. Dennis Leech, 1988. "The Relationship Between Shareholding Concentration and Shareholder Voting Power in British Companies: A Study of the Application of Power Indices for Simple Games," Management Science, INFORMS, vol. 34(4), pages 509-527, April.
    6. repec:bla:scandj:v:90:y:1988:i:2:p:245-53 is not listed on IDEAS
    7. J. W. Milnor & L. S. Shapley, 1978. "Values of Large Games II: Oceanic Games," Mathematics of Operations Research, INFORMS, vol. 3(4), pages 290-307, November.
    8. Leech, Dennis & Leahy, John, 1991. "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, Royal Economic Society, vol. 101(409), pages 1418-1437, November.
    9. N. Z. Shapiro & L. S. Shapley, 1978. "Values of Large Games, I: A Limit Theorem," Mathematics of Operations Research, INFORMS, vol. 3(1), pages 1-9, February.
    10. Philip Straffin, 1977. "Homogeneity, independence, and power indices," Public Choice, Springer, vol. 30(1), pages 107-118, June.
    11. Shapley, L. S. & Shubik, Martin, 1954. "A Method for Evaluating the Distribution of Power in a Committee System," American Political Science Review, Cambridge University Press, vol. 48(3), pages 787-792, September.
    12. Dan Felsenthal & Moshé Machover & William Zwicker, 1998. "The Bicameral Postulates and Indices of a Priori Voting Power," Theory and Decision, Springer, vol. 44(1), pages 83-116, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leech, Dennis, 1999. "Minority Control: An Analysis of British Companies using Voting Power Indices," Economic Research Papers 269251, University of Warwick - Department of Economics.
    2. Dennis Leech, 2002. "An Empirical Comparison of the Performance of Classical Power Indices," Political Studies, Political Studies Association, vol. 50(1), pages 1-22, March.
    3. Crama, Yves & Leruth, Luc, 2007. "Control and voting power in corporate networks: Concepts and computational aspects," European Journal of Operational Research, Elsevier, vol. 178(3), pages 879-893, May.
    4. Taylan Mavruk & Conny Overland & Stefan Sjögren, 2020. "Keeping it real or keeping it simple? Ownership concentration measures compared," European Financial Management, European Financial Management Association, vol. 26(4), pages 958-1005, September.
    5. Sascha Kurz, 2016. "The inverse problem for power distributions in committees," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(1), pages 65-88, June.
    6. Leech, Dennis, 2002. "Shareholder Voting Power and Ownership Control of Companies," Economic Research Papers 269335, University of Warwick - Department of Economics.
    7. Edwards, Jeremy S.S. & Weichenrieder, Alfons J., 2009. "Control rights, pyramids, and the measurement of ownership concentration," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 489-508, October.
    8. Crespi, R. & Renneboog, L.D.R., 2000. "United we stand : Corporate Monitoring by Shareholder Coalitions in the UK," Other publications TiSEM 226b4a58-7d8a-436c-8376-c, Tilburg University, School of Economics and Management.
    9. Jeremy Edwards & Alfons J. Weichenrieder & Alfons Weichenrieder, 2004. "How Weak is the Weakest-Link Principle? On the Measurement of Firm Owners’ Control Rights," CESifo Working Paper Series 1255, CESifo.
    10. Leech, Dennis, 2002. "Computation of Power Indices," The Warwick Economics Research Paper Series (TWERPS) 644, University of Warwick, Department of Economics.
    11. André Casajus & Helfried Labrenz & Tobias Hiller, 2009. "Majority shareholder protection by variable qualified majority rules," European Journal of Law and Economics, Springer, vol. 28(1), pages 9-18, August.
    12. Dennis Leech, 2013. "Power indices in large voting bodies," Public Choice, Springer, vol. 155(1), pages 61-79, April.
    13. Annick Laruelle, 1999. "- On The Choice Of A Power Index," Working Papers. Serie AD 1999-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    14. Gary Gorton & Frank Schmid, 2000. "Class Struggle Inside the Firm: A Study of German Codetermination," NBER Working Papers 7945, National Bureau of Economic Research, Inc.
    15. Levy, Marc, 2011. "The Banzhaf index in complete and incomplete shareholding structures: A new algorithm," European Journal of Operational Research, Elsevier, vol. 215(2), pages 411-421, December.
    16. René Brink & Agnieszka Rusinowska & Frank Steffen, 2013. "Measuring power and satisfaction in societies with opinion leaders: an axiomatization," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(3), pages 671-683, September.
    17. Barua, Rana & Chakravarty, Satya R. & Roy, Sonali & Sarkar, Palash, 2004. "A characterization and some properties of the Banzhaf-Coleman-Dubey-Shapley sensitivity index," Games and Economic Behavior, Elsevier, vol. 49(1), pages 31-48, October.
    18. Annick Laruelle & Federico Valenciano, 2005. "A critical reappraisal of some voting power paradoxes," Public Choice, Springer, vol. 125(1), pages 17-41, July.
    19. Pongou, Roland & Tchantcho, Bertrand & Tedjeugang, Narcisse, 2014. "Power theories for multi-choice organizations and political rules: Rank-order equivalence," Operations Research Perspectives, Elsevier, vol. 1(1), pages 42-49.
    20. Michel Grabisch & Agnieszka Rusinowska, 2010. "A model of influence in a social network," Theory and Decision, Springer, vol. 69(1), pages 69-96, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:uwarer:269334. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.