Property networks of corporations as cause of abusive behaviour: a stock market analysis based on institutional economics

Abstract

The present study deals with the fact that it seems as if executive boards have developed a self-service-mentality concerning the corporations they are meant to manage. The surprise about this is not the attempt of exploitation (rather the opposite would be surprising from an economic point of view) but the apparent absence of sanctions imposed by the owners. This study shows that this behaviour of corporations’ owners is at least to a main part due to the fact, that the reciprocal property of corporations prevents the exercise of certain property rights by the ‘true’ holders.

Notes

Due to his ownership of one-third of E1 A holds as well (1/3)²of E₂ and E₃, what causes further (1/3)³ of E₂ and E₃ as well as 2(1/3)³ of E₁. Every iteration causes new participation of E2 and E3 in E1, so that finally A holds

B and C each hold

of E₁ through indirect participation only.