Firm-level Study on the Global Connection through Stock Ownership Relations

The progress of globalization has made economic relations around the world ever more complex, including stock ownership. Here we analyze the Global Equity Ownership database compiled by Thomson Reuters Corporation for the period from 1997 to 2020, currently known as the Refinitiv Ownership and Profiles database. The comprehensive database enables us to construct a stock ownership network for every year that classifies firms and shareholders as nodes and stock ownership relationships as directed links. By adopting network-theoretic methods, we elucidate how firms and investors are connected globally through their stock ownership relations. We pay special attention to the role of Japan in the network. We find that the Japanese firms are discriminated from those in the other countries by strong correlation between their in-degree and out-degree. Such peculiarity in the node properties leads to a loosely coupled cluster constituted dominantly by most Japanese firms with multilateral cross shareholdings. This fact is confirmed by the theory for random directed networks and by randomization simulations. We also address the current issue of publicly listed parent/subsidiary pairs of firms by simulating what would happen to the cooperative ownership structure in Japan if those pairs of firms are combined into one.