A multiple network approach to corporate governance

Abstract

In this work, we consider corporate governance (CG) ties among companies from a multiple network perspective. Such a structure naturally arises from the close interrelation between the Shareholding network and the Board of Directors network. In order to capture the simultaneous effects of both networks on CG, we propose to model the CG multiple network structure via tensor analysis. In particular, we consider the TOPHITS model, based on the PARAFAC tensor decomposition, to show that tensor techniques can be successfully applied in this context. By providing some empirical results from the Italian financial market in the univariate case, we then show that a tensor–based multiple network approach can reveal important information.

This is a preview of subscription content, access via your institution.

Notes

  1. 1.

    Sources: Bloomberg and Borsa Italiana databases. Shareholding structure as of 16 July 2013 and the board composition as of July 2013.

  2. 2.

    The analysis has been performed using the Matlab Tensor Toolbox Version 2.5 (Bader et al. 2012) and the Matlab N–Way Toolbox (Andersson and Bro 2000). Both toolboxes provide very similar results, thus showing a certain degree of numerical robustness of the method proposed.

References

  1. Andersson, C.A., Bro, R.: The N-way toolbox for MATLAB. Chemom. Intell. Lab. Syst. 52(1), 1–4 (2000)

    Article  Google Scholar 

  2. Bader, B.W., Kolda, T.G., et al.: MATLAB Tensor Toolbox Version 2.5. http://www.sandia.gov/ tgkolda/TensorToolbox/ (2012). Jan 2012

  3. Barrat, A., Barthélemy, M., Vespignani, A.: Dynamical Processes on Complex Networks, 4th edn. Cambridge University Press, Cambridge (2011)

    Google Scholar 

  4. Battiston, F., Nicosia, V., Latora, V.: Structural measures for multiplex networks. Phys. Rev. E 89, 032804 (2014)

    Article  Google Scholar 

  5. Battiston, S., Catanzaro, M.: Statistical properties of corporate board and director networks. Eur. Phys. J. B 38, 345–352 (2004)

    Article  Google Scholar 

  6. Bertoni, F., Randone, P.A.: The small-world of Italian finance: ownership interconnections and board interlocks amongst Italian listed companies. Working paper (2006)

  7. Bianchi, M., Bianco, M.: Italian corporate governance in the last 15 years: from pyramids to coalitions?. Finance working paper No 144. European corporate governance institute (2006)

  8. Bianco, M., Casavola, P.: Italian corporate governance: effects on financial structure and firm performance. Eur. Econ. Rev. 43(4), 1057–1069 (1999)

    Article  Google Scholar 

  9. Bianconi, G.: Statistical mechanics of multiplex networks: entropy and overlap. Phys. Rev. E 87, 062806 (2013)

    Article  Google Scholar 

  10. Menichetti, G., Remondini, D., Panzarasa, P., Mondragón, R. J., Bianconi, G., Weighted multiplex networks arXiv:1312.6720 (2013)

  11. Bonacich, P.: Power and centrality: a family of measures. Am. J. Sociol. 92(5), 1170–1182 (1987)

    Article  Google Scholar 

  12. Bro, R., Kiers, H.A.L.: A new efficient method for determining the number of components in PARAFAC models. J. Chemom. 17, 274–286 (2003)

    Article  Google Scholar 

  13. Cohen, R., Havlin, S.: Complex Networks: Structure, Robustness and Function. Cambridge University Press, Cambridge (2010)

    Book  Google Scholar 

  14. D’Errico, M., Grassi, R., Stefani, S., Torriero, A.: Shareholding networks and centrality: an application to the Italian financial market. Lect. Notes Econ. Math. Syst. 613, 215–228 (2009)

    Google Scholar 

  15. D’Errico, M., Stefani, S., Torriero, A. Informal ties in organizations: a case study. Qual. Quant. pp. 1–15 (2013). Article in Press. http://dx.doi.org/10.1007/s11135-013-9862-0

  16. Estrada, E.: The Structure of Complex Networks: Theory and Applications. Oxford University Press, Oxford (2012)

    Google Scholar 

  17. Faccio, Mara, Larry, H.P.: The ultimate ownership of Western European corporations. J. Financ. Econ. 65.3, 365–395 (2002)

    Article  Google Scholar 

  18. Grassi, R.: Vertex centrality as a measure of information flow in Italian Corporate Board Networks. Phys. A 389(12), 2455–2464 (2010)

    Article  Google Scholar 

  19. Harary, F.: Graph Theory. Addison-Wesley, Reading (1969)

    Google Scholar 

  20. Harshman, R.A.: Foundations of the PARAFAC procedure: models and conditions for an “explanatory” multimodal factor analysis. UCLA Working papers in phonetics 16, 1–84 (1970)

  21. Kleinberg, J.M.: Authoritative sources in a hyperlinked environment. J. ACM 46(5), 604–632 (1999)

    Article  Google Scholar 

  22. Kolda, T.G., Bader, B.W., Kenny, J.P.: Higher-order web link analysis using multilinear algebra, SANDIA REPORT, SAND2005-4548 (2005)

  23. Kolda, T.G., Bader, B.W.: Tensor decompositions and applications. SIAM Rev. 51(3), 455–500 (2009)

    Article  Google Scholar 

  24. Perra, N., Fortunato, S.: Spectral centrality measures in complex networks. Phys. Rev. E 78, 036107 (2008)

    Article  Google Scholar 

  25. Piccardi, C., Calatroni, L., Bertoni, F., Communities in Italian corporate networks. Phys. A: Stat. Mech. Appl. 389(22), pp. 5247–5258 (2010). ISSN 0378–4371, http://dx.doi.org/10.1016/j.physa.2010.06.038

  26. Rotundo, G., D’Arcangelis, A.M.: Network of companies: an analysis of market concentration in the Italian stock market. Qual. Quant. 1–18 (in press, 2013).

  27. Santella, P., Drago, C., Polo, A., Gagliardi E.: A Comparison among the director networks in the main listed companies in France, Germany, Italy, and the United Kingdom. MPRA Paper No. 16397 (2009)

  28. Solà L., Romance M., Criado R., Flores J., Garcia Del Amo A., Boccaletti S.: Centrality of nodes in multiplex networks. arXiv:1305.7445v1 (2013).

  29. Tucker, L.R.: Implications of factor analysis of three-way matrices for measurement of change. In: Harris, C.W. (ed.) Problems in Measuring Change, pp. 122–137. University of Wisconsin Press, Madison (1963)

    Google Scholar 

Download references

Acknowledgments

We would like to thank the anonymous referees for their valuable comments and suggestions which helped us to improve the manuscript.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Marco D’Errico.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Bonacina, F., D’Errico, M., Moretto, E. et al. A multiple network approach to corporate governance. Qual Quant 49, 1585–1595 (2015). https://doi.org/10.1007/s11135-014-0075-y

Download citation

Keywords

  • Multiple networks
  • Tensor analysis
  • Corporate governance