Corporations' control strategies using network optimization

AbstractThe ownership of a quoted company is usually spread among various shareholders. This dispersion can be characterized by an oriented network, whose nodes represent the companies, and an arc between companies i and j, with weight sij, indicates that company i owns sij percent of company j, being denoted by stock shareholding network (SSN). Given two sets of companies T and C0 from a SSN, we say that the companies in C0 control those in T if they own or imply ownership of at least αj percent of companies’ T shares. So, given a targeting set T, our problem is to find a set of companies C0 in which we invest such that the entire investment cost is the lowest. This problem has relevant applications in corporate governance and it can be modeled within network optimization. We discuss its applicability using a broad set of companies in the European stock market.