A Few Wealthy Families Control a Large Fraction of Many Economies

DECEMBER 9, 2005

Data and information taken from 666 ff. of Morck, Wolfenzon, and Yeung Corporate Governance, Journal of Economic Literature vol. 43, no. 3 (which, itself, summarizes a multitude of other papers).

Here are the value of corporate assets controlled by the ten largest families as percentage of total market capitalization (in brackets is the amount controlled by the single top family):

  • Austria: 19%
  • Belgium: 30%
  • Finland: 22%
  • France: 29%
  • Germany: 21%
  • Ireland: 14%
  • Italy: 20% (10% – the Agnellis)
  • Norway: 23%
  • Portugal: 34%
  • Spain: 11%
  • Sweden: 13% (50% – the Wallenberg family, who through a complex and large control pyramid are estimated to have effective control of roughly half the market capitalization of the Swedish stock exchange – [ed: this estimate which is presently seperately seems to contradict 13% figure])
  • Switzerland: 29% (18%)
  • UK: 4% (1.1%)

For East Asia we have statistics for top 15 families:

  • Hong Kong: 84%
  • Malaysia: 76%
  • Singapore: 48%
  • Phillipines: 46% (17%)
  • Thailand: 39%
  • Indonesia: – (17%)
  • South Korea: – (11.4%)

Overall, across Western Europe, the value of corporate assets controlled by the leading family, measured as a fraction of market capitalization, ranges from 18 percent in Switzerland to only 1.10 percent in the United Kingdom. For the ten largest families, the figures are 19 percent for Austria, 30 percent for Belgium, 22 percent for Finland, 29 percent for France, 21 percent for Germany, 14 percent for Ireland, 20 percent for Italy, 23 percent for Norway, 34 percent for Portugal, 11 percent for Spain, 13 percent for Sweden, 29 percent for Switzerland, and only 4 percent for the United Kingdom.

East Asian economies tend to resemble Sweden more than Canada. Claessens, Djankov, and Lang (2000) find that the top fifteen family control pyramids in typical East Asian economies hold corporate assets worth a large fraction of GDP—84 percent of GDP in Hong Kong, 76.2 percent in Malaysia, 48.3 percent in Singapore, 46.7 percent in the Philippines, and 39.3 percent in Thailand (these are the largest numbers reported). They state (p. 109) that “these results suggest that a relatively small number of families effectively control most East Asian economies.” They also find that the single wealthiest family controls 17.1 percent of the market capitalization in the Philippines, 16.6 percent in Indonesia, and 11.4 percent in South Korea. La Porta, Lopez-de-Silanes, and Shleifer (1999) report that Huchison Whampoa, the third largest listed company in Hong Kong, is 43.9 percent controlled by Cheung Kong Holdings, the fifth largest listed company, which is 35 percent owned by Li Ka Shing family. Li Ka Shing, through a pyramidal arrangement, controls three of the twenty largest companies in Hong Kong, including the eleventh largest, Hong Kong Electric Holdings. Claessens, Djankov, and Lang (2000) provide further description of the Li Ka Shing control pyramid.

Claessens, Djankov, and Lang (2000) describe the extensive corporate control exercised by the Ayala control pyramid in the Philippines. The Ayala Corporation, the second largest listed company on the Manila Stock Exchange in terms of market capitalization, controls Ayala Land, the largest. The Bank of the Philippine Islands, the fifth largest, also belongs to the Ayala control pyramid. The principal owner of the Ayala Corporation is the privately held Mermac Inc. The Tokyo Mitsubishi Bank controls 23 percent and others control less than 5 percent each. Mermac is 100 percent controlled by the Ayala family.

Kee-Hong Bae, Jun-Koo Kang, and Jin- Mo Kim (2002) describe the importance of Korean family controlled pyramids, or chaebols. Chaebols, while basically pyramidal in nature, have extensive reciprocal holdings as well as simple pyramidal intercorporate ownership links. The top thirty chaebols “contribute to 62.5 percent of the total assets and 72.6 percent of the gross sales of all listed firms” (p. 2699) and each is diversified across many unrelated industries. Each is also controlled by a single wealthy family (p. 2702).