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An Empirical Comparison of the Performance of Classical Power Indices

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  • Leech, Dennis
Abstract
Power indices are general measures of the relative a priori voting power of individual members of a voting body. They are useful for both positive and normative analysis of voting bodies particularly those using weighted voting. This paper applies new algorithms for computing the rival Shapley-Shubik and Banzhaf indices for large voting bodies to shareholder voting power in a cross section of British companies. Each company is a separate voting body and there is much variation in ownership between them resulting in different power structures. Because the data are incomplete, both finite and “oceanic” games of shareholder voting are analysed. The indices are appraised, using reasonable criteria, from the literature on corporate control. The results are unfavourable to the Shapley-Shubik index and suggest that the Banzhaf index much better reflects the variations in the power of shareholders between companies as the weights of shareholder blocs vary.

Suggested Citation

  • Leech, Dennis, 2001. "An Empirical Comparison of the Performance of Classical Power Indices," Economic Research Papers 269334, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269334
    DOI: 10.22004/ag.econ.269334
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    References listed on IDEAS

    as
    1. Dan S. Felsenthal & Moshé Machover, 1998. "The Measurement of Voting Power," Books, Edward Elgar Publishing, number 1489.
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    6. repec:bla:scandj:v:90:y:1988:i:2:p:245-53 is not listed on IDEAS
    7. J. W. Milnor & L. S. Shapley, 1978. "Values of Large Games II: Oceanic Games," Mathematics of Operations Research, INFORMS, vol. 3(4), pages 290-307, November.
    8. Leech, Dennis & Leahy, John, 1991. "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, Royal Economic Society, vol. 101(409), pages 1418-1437, November.
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    Full references (including those not matched with items on IDEAS)

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