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An Empirical Comparison of the Performance of Classical Power Indices

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  • Leech, D.

Abstract

This paper assesses the indices against a set of reasonable criteria in terms of shareholder voting power and the control of the corporation in a large cross section of British companies. Each company is a separate voting body and there is much variation in the distribution of voting shares among them. Moreover reasonable criteria exist against which to judge the indices. New algorithms for the Shapley-Shubik and Banzhaf indices are applied to detailed data on beneficial ownership of 444 large UK companies without majority control.

Suggested Citation

  • Leech, D., 2000. "An Empirical Comparison of the Performance of Classical Power Indices," The Warwick Economics Research Paper Series (TWERPS) 563, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:563
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    References listed on IDEAS

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    1. repec:bla:scandj:v:90:y:1988:i:2:p:245-53 is not listed on IDEAS
    2. Philip Straffin, 1977. "Homogeneity, independence, and power indices," Public Choice, Springer, vol. 30(1), pages 107-118, June.
    3. 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.
    4. 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.
    5. 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.
    6. Roth, Alvin E., 1977. "Utility functions for simple games," Journal of Economic Theory, Elsevier, vol. 16(2), pages 481-489, December.
    7. Dan S. Felsenthal & Moshé Machover, 1998. "The Measurement of Voting Power," Books, Edward Elgar Publishing, number 1489.
    8. 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.
    9. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    INDEXES ; GAMES ; VOTING ; SHAREHOLDERS;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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