The promise and perils of using big data in the study of corporate networks: problems, diagnostics and fixes

A new paper by the CORPNET group has been published in the Global Networks journal. The article, “The promise and perils of using big data in the study of corporate networks: problems, diagnostics and fixes”, is written by Eelke Heemskerk, Kevin Young, Frank takes, Bruce Cronin, Javier Garcia-Bernardo, Lasse Hendriksen, William Winekoff, Vladimir Popov and Audrey Lautin-Lamothe, and can be found here.

Abstract
Network data on connections between corporate actors and entities – for instance through co-ownership ties or elite social networks – are increasingly available to researchers interested in probing the many important questions related to the study of modern capitalism. Given the analytical challenges associated with the nature of the subject matter, variable data quality and other problems associated with currently available data on this scale, we discuss the promise and perils of using big corporate network data (BCND). We propose a standard procedure for helping researchers deal with BCND problems. While acknowledging that different research questions require different approaches to data quality, we offer a schematic platform that researchers can follow to make informed and intelligent decisions about BCND issues and address these through a specific work-flow procedure. For each step in this procedure, we provide a set of best practices for how to identify, resolve and minimize the BCND problems that arise.

Two Policy Briefs by the CORPNET group

Two Policy Briefs have been written by a member of the CORPNET group, Carmel Shenkar.

The ‘Regulatory Cooperation and Conflict: Regulating Systemic Risk in the Asset Management Industry’ Policy Brief can be found here.

Abstract
This brief reviews the legal powers allocated to designated authorities to regulate the asset management industry in three ‘jurisdictions’. It focuses on the powers of different government bodies to designate and regulate potential systemic risk posed by systematically important financial institutions; and in particular, by nonbank non-insurer asset management companies. By explaining the different regulatory structures, this brief outlines the institutional architecture entrusted to maintain national and international financial stability.

The ‘Horizontal minority shareholdings in the EU, US, UK and Germany: Applicable Legal Framework’ Policy Brief can be found here.

Abstract
The practice of cross-ownership in competing firms by institutional investors has grown significantly in recent years. Such cross ownership is said to result in anticompetitive effects in concentrated industries. One possibility to regulate this activity, thus, is antitrust regulation. This brief presents an initial review of current antitrust/competition regulatory framework in four jurisdictions: the EU, US, UK and Germany.

States versus Corporations: Rethinking the Power of Business in International Politics

A new paper by the CORPNET group has been published in The International Spectator: Italian Journal of International Affairs. The article, “States versus Corporations: Rethinking the Power of Business in International Politics”, is written by Milan Babic, Jan Fichtner and Heemskerk and can be found here.

Abstract
Over 25 years ago, Susan Strange urged IR scholars to include multinational corporations in their analysis. Within IR and IPE discussions, this was either mostly ignored or reflected in an empirically and methodologically unsatisfactory way. We reiterate Strange’s call by sketching a fine-grained theoretical and empirical approach that includes both states and corporations as juxtaposed actors that interact in transnational networks inherent to the contemporary international political economy. This realistic, juxtaposed, actor- and relations-centred perspective on state and corporate power in the global system is empirically illustrated by the example of the transnationalisation of state ownership.

Screening Politics: The Spider’s Web

On the 4th of December “The Spider’s Web – An investigation into the world of Britain’s secrecy jurisdictions and the City of London” will be screened at CREA Amsterdam.

States lose 600 billion dollars in taxes through corporate tax avoidance practices spanning several countries. Some of these countries, such as the United Kingdom or the Netherlands play a key role facilitating tax avoidance, as recent studies by researchers at the University of Amsterdam showed.

The Spider’s Web is a documentary film that shows how Britain transformed from a colonial power into a global financial power. At the demise of empire, the City of London created a web of offshore secrecy jurisdictions that captured wealth from across the globe and hid it behind obscure financial structures. Today, up to half of global offshore wealth is estimated to be hidden in British offshore jurisdictions and Britain and its offshore jurisdictions are the largest global players in the world of international finance. How did this come about, and what impact does it have on the world today? This is what the Spider’s Web sets out to investigate.

After the film, the public will get the opportunity to address questions directly to the filmmakers in London and an expert panel. Subsequently, we will discuss the role of the Netherlands in offshore finance, and the advantages and drawbacks for Dutch and European citizens.

Panel participants:
Rodrigo Fernandez, expert on tax avoidance from SOMO
Ewald Engelen, prof. of Financial Geography at the UvA
John Christensen, director of the Tax Justice Network

Moderation: Eelke Heemskerk, program director of the CORPNET research team

CREA Amsterdam
Nieuwe Achtergracht 170, 1018WV Amsterdam
Monday December 4th 20:00- 23.59

Free entrance for students, others € 5,-

Please register for this event: https://goo.gl/forms/gO442t7qbtBMB1XI3

Director: Michael Oswald
Year: 2017
Trailer: http://spiderswebfilm.com/#trailer

The Cayman conundrum: why is one tiny archipelago the largest financial centre in Latin America and the Caribbean?

A new blog by the CORPNET group has been published by the LSE Latin America and Caribbean Centre. The blog, “The Cayman conundrum: why is one tiny archipelago the largest financial centre in Latin America and the Caribbean?”, is written by Jan Fichtner and can be found here.

Abstract
Analysing how millions of multinational corporations structure their global ownerships chains reveals that Cayman acts as a ‘sink’ offshore financial centre where foreign capital accumulates and data trails often end, writes Jan Fichtner (University of Amersterdam).

When theory meets methods: the naissance of computer assisted corporate interlock research

A new paper by the CORPNET group has been published in the Global Networks journal. The article, “When theory meets methods: the naissance of computer assisted corporate interlock research”, is written by Meindert Fennema and Eelke Heemskerk and can be found here.

Abstract
In this article, we study the emergence of computer aided network analysis as an example of ‘Mertonian’ multiple discovery. Computer assisted quantitative network analysis emerged around 1970 and small groups of researchers in different universities, who were independent of each other and looking for the right concepts and computer programs to implement graph theory in social analysis, first applied it to corporate interlock networks. We show how mathematical graph theory provided a toolbox for systematic network analysis and that simultaneously in the Netherlands and the United States this toolbox found an application in the study of corporate power. A historical narrative covers the three main centres in which large-scale corporate network analysis emerged – Amsterdam, California and Stony Brook. For each centre, we provide a sketch of the people involved, the tools they used, and the motivations that brought them to this topic. Our analysis makes clear that one cannot understand the emergence of computer aided network analysis without considering the personal and often political motivations of those who engaged in the first board interlock studies. Insurgent students of political science and sociology pushed for a research agenda on corporate power and found support from scholars who were keen to develop innovative network analysis methods. Hence, corporate network analysis became a legitimate field of research.

Young scientist wins award for platform to investigate corporate tax avoidance

A member of the CORPNET group, Frank Takes, has won the Young eScientist Award 2017. The prize aims to stimulate a young scientist demonstrating excellence in eScience: the development or application of digital technology to address scientific challenges. The prize will be used to undertake a joint research project, in which Takes will receive support by eScience Research Engineers (experts in the development and application of research software). More information can be found here.

Neymar and State Money: How Sovereign Investment enters Global Capitalism

A new blog by the CORPNET group had been published on Medium.com. The blog, “Neymar and State Money: How Sovereign Investment enters Global Capitalism”, is written by Milan Babic and Katie-Ann Wilson and can be found here.

Abstract
This blog post discusses the activities, outreach and role of the Qatar Investment Authority (QIA) that recently drew global attention by enabling the most expensive football player transfer in history. Besides the 222 Mio. € investment in Brazilian superstar Neymar, the QIA is very active as an investment fund around the world. The interesting and hardly studied aspect about the QIA is its status as wholly state-owned entity participating in global capitalism. CORPNET is able to track these activities on a global scale by looking at fine-grained ownership data. This investigation of cross-border state ownership networks goes beyond Sovereign Wealth Funds and can be extended to any state-owned entity around the world.

The New Mandate Owners: Passive Asset Managers and the Decoupling of Corporate Ownership

A new article by the CORPNET group has been published in the June  2017 issue of the Antitrust Chronicle (pp. 51-57). The piece, “The New Mandate Owners: Passive Asset Managers and the Decoupling of Corporate Ownership”, is written by Carmel Shenkar, Eelke Heemskerk and Jan Fichtner and can be found here.

Abstract A major shift toward passively managed index funds in recent years has led to the re-concentration of corporate ownership in the hands of just three large asset management firms, the Big Three: BlackRock, Vanguard and State Street. We propose that this trend has re-structured ownership in capital markets. Adopting a contractual view to the corporate share, we re-define share holding and suggest that the New Mandate Owners in fact hold the essence of corporate power, as their aggregated positions capture the core element of the franchise of corporate voting.

Big Three paper published in Business and Politics

A new paper by the CORPNET group has been published in the June issue of Business and Politics journal (pp: 298-326). The article, “Hidden power of the Big Three? Passive index funds, re-concentration of corporate ownership, and new financial risk”, is written by Jan Fichtner, Eelke Heemskerk and Javier Garcia-Bernardo and can be found here.

Abstract
Since 2008, a massive shift has occurred from active toward passive investment strategies. The passive index fund industry is dominated by BlackRock, Vanguard, and State Street, which we call the “Big Three.” We comprehensively map the ownership of the Big Three in the United States and find that together they constitute the largest shareholder in 88 percent of the S&P 500 firms. In contrast to active funds, the Big Three hold relatively illiquid and permanent ownership positions. This has led to opposing views on incentives and possibilities to actively exert shareholder power. Some argue passive investors have little shareholder power because they cannot “exit,” while others point out this gives them stronger incentives to actively influence corporations. Through an analysis of proxy vote records we find that the Big Three do utilize coordinated voting strategies and hence follow a centralized corporate governance strategy. However, they generally vote with management, except at director (re-)elections. Moreover, the Big Three may exert “hidden power” through two channels: First, via private engagements with management of invested companies; and second, because company executives could be prone to internalizing the objectives of the Big Three. We discuss how this development entails new forms of financial risk.