Discussion paper

DP17861 The Globalization of Corporate Control

The internationalization of corporate control is a facet of globalization that is not well understood, as it is challenging to trace controlling shareholders from the esoteric structure of corporate ownership, often hidden behind "shell" vehicles in offshore centers. We identify ultimate controlling shareholders from complex ownership pyramids across $22,000$ publicly-traded firms in 2012, after the global financial crisis, and in 2019, just before the pandemic, and study the globalization of control. Home bias in corporate control is sizable, higher than in portfolio equity. The use of tax-haven incorporated companies in the exercise of control is, on average, modest but heterogeneous across countries. The network of international control appears very sparse, with much fewer links than ownership. In the empirical part, we explore the drivers of cross-border corporate control and ownership. First, we show that a baseline gravity model does a good job, as bilateral links are more potent for populous, affluent, and proximate countries. Institutional quality and tax haven status at source and destination improve the model fit modestly. Second, we explore the role of bilateral features. Legal tradition similarities, international economic policy coordination, and cultural, linguistic, and historical ties play a non-negligible role telling of asset market and informational frictions in the globalization of control markets; economic policy and legal similarities matter for banks and other financial institutions, while informational, cultural barriers are potent for individuals and families. International diversification motives play no major role. The results have implications for theoretical works on the internationalization of corporate control markets.


Fonseca, L, K Nikalexi and E Papaioannou (2023), ‘DP17861 The Globalization of Corporate Control‘, CEPR Discussion Paper No. 17861. CEPR Press, Paris & London. https://cepr.org/publications/dp17861