THE DISTRIBUTION OF POWER IN PUBLIC
LISTED COMPANIES
A comparative case study that investigates power by means of market
capitalization of public listed companies between the U.S and China
Bachelor Thesis Political Science Faculty Social Sciences
Individual Thesis
Robbin Breeuwer 10793348
Mentor: dhr. J.R. Fichtner Second corrector: Philip Schleifer
June 10 2018 Words: 8900
2
Index
1 Introduction 3
2 Theoretical Frame work 5
3 Method 12 3.1 Cases 12 3.2 Orbis Database 13 3.3 Stock Exchanges 14 3.4 Operationalizing power 15 4 Results 17 4.1 The U.S. distribution of power 17 4.1.1 The distribution of power in the New York Stock Exchange 18 4.1.2 The distribution of power in the NASDAQ 20
4.2 The Chinese distribution of power 23 4.2.1 The distribution of power in the Shanghai Stock Exchange 24 4.2.2 The distribution of power in the Shenzhen Stock Exchange 26
5 Conclusion & Discussion 28
3
‘’Money: Power at its most liquid form’’ – Mason Cooley
1 Introduction
A trade war between the U.S. and China is more than an economic offensive, it is a claim for the hegemonic position (Wolf 2018; Mitchel 2018; Wee & Tiantian 2018). On the 15th of June Trump announced a 25% tariff on $50 billion worth of Chinese goods. He threatened with new tariffs of $200 billion worth of goods if China does not open their markets. China will strike back with tariff on U.S. goods (Ngo 2018). These tensions are on a social level relevant because the life of many people could change if there would be a new hegemon. Product prices could inflate, product can be kept out of the market and even according to Modelski (1987) a change in hegemon comes with a war between the two powers.
These tensions are according to some scholars based on China that challenges the hegemonic position of the United States. China has an increasing GDP and will pass the U.S. in 2028 with current grow rate of 6.5% in comparison with the U.S. that has a 2.0 % grow rate (Scott & Sam 2016).
There are two problems with the traditional conceptualization of hegemony. First, it is problematic to measure economic power (hegemony) with GDP as proxy, because global finance changed after the second world war. Second, U.S. hegemony not only consist of the state as actor, but also companies that are legally based in the U.S.. The state on its own does not fully contribute to the prosperity of the state, companies have a large contribution to the total welfare.
Therefore, my thesis will focus, on another proxy for economic power namely market capitalization. Second, it will not only look at U.S. hegemony, and their competitor (China), as the state as actor, but also at a more contemporary view of hegemony namely companies. I thus focus on market capitalization and especially on the market capitalization of public listed companies.
The research question that will be answered in this thesis is: ‘’How is power distributed
in global finance, focussing on the market capitalization of public listed companies of the U.S. and China since 2011? To conduct my research, I will focus on four stock exchanges, two
originated from the U.S. namely the New York stock exchange and the NASDAQ. The other two stock exchanges are originated from China, namely the Shanghai stock exchange and the Shenzhen stock exchange. The results show that power is highly concentrated in the top 500 companies of the four stock exchanges. Furthermore, the top 10 companies have a significant amount of power in comparison with the rest.
4 The topic is relevant on a scientific level because it first gives new insight on how to look and measure economic power and second it treats hegemony not only as state but a conglomeration of companies. Different theories that try to research the topic of economic power clamped themselves on GDP as proxy for economic power (Arrighi 2007; Friedman and Mandelbaum 2011; Gelb 2010: Schmelzer 2015; Cable 1995).
Starrs (2013) looks for instance, at the ownership of the top 2000 Trans-national companies. He broke with traditional line of thought, that GDP is the best proxy to measure economic power and opened the doors to look for other proxies that could measure economic power. In his case ownership is a proxy to measure economic power. The following quote fulfilled this thought: ‘’To repeat, in the era of transnational capital we cannot assume that the rapid rise of a country’s GDP and/or domestic market indicates the rapid rise of that country’s economic power’’ (Starss 2013: 821).
Fichtner (2016) also looked at different proxies for economic power. In his article: ‘’Perpetual decline or persistent dominance? Uncovering Anglo-America’s true structural power in global finance’’ he came up with 9 new proxies for economic power. Market capitalisation is one of them.
Less research is conducted in the field of market capitalization focussing on the dynamic relation between capital and power. This field is heavily understudied and ignored because (market) capitalization is first too simplistic and second there was no need to look at capitalization, because prior to urbanisation price did not ordered or structured society (Nitzan & Bichler 2009: 150-153). But both these claims are debatable, first capitalization is a contested concept because is not only measured in intrinsic values of products. Furthermore, price is a concept that originated with the rise of urbanization. Price structures society in urbanized societies (Nitzan & Bichler 2009: 153). The urbanisation ratio increased from 10% in the 1900s to 54% in 20181. This ratio tells how many people live in an urban environment in comparison with people that live on the countryside. These claims are not tenable thus capitalization is worth researching. It is important to conduct research in this field because market capitalization is poorly researched. There are not many studies conducted on the topic of market capitalization as power. An article with market capitalization as subject, focusses on the relation between power and law (Mizuno, Oshnishi and Watanabe (2016). However, Fichtner (2016) researched market capitalization as a proxy for economic power, but, he focussed mainly on the maximum
5 market capitalization of different actors such as Anglo-American companies, companies from the Eurozone, China and Japan over time (Fichtner 2016: 15-16).
In my thesis I will research the market capitalization of public listed companies in a more detailed way, instead of looking at total market capitalization of an actor as the state, I will take a closer look at which companies possess the most power in the U.S. and China. Doing this provides a better overview of how power is distributed among companies in countries. Hereafter, the stock exchanges are compared with each other to see if there are any similarities or differences in their distribution of power.
This thesis is structured as follows. In chapter 2, I will discuss the theoretical frame work that is used for my thesis. This chapter consist of discussing GDP as proxy for economic power. I also legitimize the choice for (market) capitalization. Furthermore, different theories of power will be discussed in this chapter, because this is one of the main concepts of this thesis.
In the third chapter I will discuss the methods I used. I will clarify the data collection, legitimize the four stock exchanges, operationalize power and legitimize the usage of the two cases, the U.S. and China. After this I will continue in chapter four with the results of my research. This chapter consist of analysis of the public listed companies within the U.S. and China. The following sub question provide a structure for chapter 4.
Sub question I: How is power distributed between U.S. public listed companies? Sub question II: How is power distributed between Chinese public listed companies? In chapter 5, I will conclude my thesis, discuss any remarks and ideas for further research.
2 Theoretical framework
In this chapter I want to discuss GDP as proxy for economic power and hegemonic stability theory. Furthermore, concepts such as power and (market) capitalization are further conceptualized. I start with discussing GDP as proxy for economic power and (market) capitalization. Then I will discuss the debate surrounding hegemonic stability theory. I will end with hypotheses surrounding my research.
As mentioned in the introduction there is a debate ongoing if GDP is the correct proxy to measure economic power in global finance. Gelb (2010) for instance argues that GDP is a more important factor to measure economic power than force. She means with force, the ability for actors i.e. state to act with military means. In her article she also discusses China and argues that China won’t use force to gain economic power, but on the contrary try to dominate money and trade. The economic proxy she uses is GDP.
6 Schmelzer (2015) also argues in line with Gelb that GDP is important proxy for economic power. Building on the post-development school and focusing on the OECD Schmelzer claimed that GDP correctly measures economic growth and that this is key to solve societal challenges.
Cable (1995) also emphasises the importance of GDP to measure economic power. He looks at the loss of economic power for states. Cable (1995) argues that for instance, the offshoring of jobs and thus the competitions of jobs are factors to measure economic power. The offshoring is job is measured in GDP.
Again, GDP is used as a tool to measure economic power, but there are also authors who do not agree with this proxy. Another author agreeing with the romanticization of GDP is Nye (2010). He argues that for instance the growth rate of China’s GDP is not a good tool to measure economic power, because there are more factors that influence power. He gives the example that China has still an underdeveloped country side, facing demographic problems (one-child policy) and needs to solve the problem for political participation (Nye 2010: 4). All these factors could influence Chinese power in a negative way.
Before capitalisation is discussed power needs to be conceptualized. Power is a central theme in political science, but this theme should also be included in the field of economy. Power is mostly divided in three different dimensions. The first dimension of power is given by Dahl (1957), he sees power as a tool that can change behaviour between two actors. In other words, the power of A to get B to do something against their own interest or that B would otherwise not do. According to some scholar this conceptualization of power is too simplistic because it doesn’t look at other important aspect surrounding power.
Agenda-setting is also an important dimension of power. Following on the first dimension of power, Schattschneider’s conceptualization of power is seen as the second dimensions of power. Agenda-setting means that some people, mostly the wealthy upper class has the power to put issues on the political agenda, while other issues does not reach the political agenda (Schattschneider 1960).
The third dimension is well explained by Steven Lukes (1974). He criticizes both dimensions of power because they are too simplistic and do not explain other important facets of power like initial preferences. In other words, the third dimensions of power surround the allowance to influence people wishes and thought (Lukes 1974: 24). When people for instance do not experience a power relation in a negative way the actor with power can sustain their power easily.
7 relational and the other is structural. The first dimension of power covenant with the relational mode of Strange, while the second dimension of power could be argued into the two modes. The third dimensions of power belong to the structural mode. Strange conceptualized structural power as ‘’the power to choose and to shape the structures of the global political economy within which other states, their political institutions, their economic enterprises and not least their professional people have to operate’’ (Strange 1987: 565).
The focus of thesis lies in Strange her conceptualization of power because conceptualization corresponds best with the theories of hegemonic stability and capital that will be discussed after this section of power.
Table 1. Overview dimensions of power.
Dimension / Relational vs. Structural
Relational Structural
First dimension Dahl (1957)
Second dimension Schattschneider (1960) Schattschneider (1960)
Third dimensions Lukes (1974) and Strange
(1994)
I continue with the debate of capital. According to Nitzan and Bichler (2009), there are two ways to look at capital. Material capital is the first view. In this view capital is to the upmost extent an economical approach, whereby capital is largely the mirror image of its material substance (Nitzan & Bichler 2009: 147-148). There are a few flaws in this view. First, it is impossible to separate economics from politics. Second, economics is not freed from the distortions of power. Third, there have never been a perfectly competitive equilibrium (Idem).
The second view is capitalisation. In this view the Greek word ‘’Nomos’’ has a central place. In Greek philosophy there is a distinction made between nature (physis) and convention (nomos). The latter describe not an objective substance, but a human creation (Nitzan & Bichler 2009: 149). If capital is a human convention, indicators that measure capital are then also created. For example, the price of oil in a material capital view exist of the material substance, whereby in a capitalisation perspective society creates factors that influence the price of this commodity. Capital then does not start from intrinsic value of labour and materials, but from a nomos perspective. Human subjectivity is then key to look at capital.
But what is exactly capitalisation? According to Nitzan & Bichler (2009), ‘’capitalisation represent the present value of a future stream of earnings: it tells us how much a capitalist would be prepared to pay now to receive a flow of money later’’(Nitzan & Bichler
8 2009: 153). Capitalisation is understandable if a trivial example is given. If you ask a working person, with a salary, how much money to would need now, to not have no earnings in the future. This then is capitalisation.
If both views are compared to each other, a difference is visible. Material capital is one dimensional because it based on intrinsic value only, while capitalization is multidimensional because it consists of four important particles such as actual future earnings, hype, a confident rate of return and risk. This makes capitalisation an interesting subject to research. Furthermore, there is need to research capitalisation because of the increasing importance of price in structuring society. Now I will discuss the different particle that are key for understanding capitalisation. The first particle of capitalization is actual future earnings. The first problem that arise is that earnings is theorized in a wrong way. Marxist and neoclassical scholars used the ‘’real’’ economy as anchor for earnings. This is a problem because there are no universal measurement units in production and consumption (Nitzan & Bichler 2009: 187). According to them, we must abandon the material capital view and investigate power as an alternative. A second problem comes with this particle. Actual future earnings are not fully predictable. A capitalist could never fully predict the future and thus a capitalist will always guess what they would be prepared to pay now. Luckily they found solution for this problem.
Hype is the second particle concerning capitalization. This particle expresses the optimism or pessimism of a capitalist about their future earnings. This feeling about their future earnings can be influenced by the amount of knowledge a capitalist possesses. If a capitalist has inside information, it uses this information to increase their future earnings (Nitzan & Bichler 2009: 191). Furthermore, this capitalist with inside information try to shape the trajectory of its future earnings. Power then lies at the core of capital with the goal to shape the trajectory of future earnings through gaining or withheld information.
The third particle is a confident rate of return. Because the future is not predictable capitalist seek to find instruments that helps them to predict the future. Because logical probability and empirical statistics are combined in science the future could be better predicted, this ensure capitalist that they trust in their future earnings (Nitzan & Bichler 2009: 199-201).
The last particle concerning capitalisation is risk. Risk seems to inherit different problems. First, risk is personal matter. Second, attitude to risk is rooted in the individual’s hedonic preferences. And third, most individuals tend to be risk averse (Nitzan & Bichler 2009: 202). The problem of risk is solved by diversification, if a capitalist diverse their capital in different companies they will spread the risk. In this respect, risk is not a personal matter and second a capitalist maybe tends to be risk averse, but if there is no/smaller risk why does the
9 capitalist care?
Nitzan and Bichler (2009), also come up with the solution for hedonic preference. Hedonic pleasure is not the mean goal of the capitalist to reducing earning volatility. They have an obsession for earning volatility because they want to predict and control their future earnings (Nitzan & Bichler 2009: 210). Structural power is then applicable to capitalisation because the capitalist wants to control and predict their future income. To succeed in this goal capitalist needs power to choose and to shape the structures of the global political economy. Not only within other states, but also their political institutions, their economic enterprises and not their professional people. Predictability and control of future earnings is the goal for actors, and structural power is the mean to accomplish this goal.
Capitalisation is not only applicable to human beings, institutions and processes. It is also applicable to companies. The term used is market capitalization. Market capitalization refers to the value of a company and is calculated by multiplying the current share price with the number of shares (Lee & Lee 2005: 173).
The next section of this theoretical frame work will discuss the theories of hegemony. In this section I also try to explain the relation between hegemony and structural power. The difficulty of hegemony is that they focus on different levels. Not only do they focus on the political level, they do also focus on the social, cultural and economic level. In this thesis I shall focus on the economic and political level, the economical-political level shall be used to look how power is concentrated in public listed companies. I do not focus on other levels of hegemony such as the cultural or social level, because while they are important it is not the scope of this thesis to look at these levels.
Before, hegemonic stability theory is discussed I want to make the notion that I refer to U.S. hegemony not to the state as actor but to U.S. corporations. I maintain a multi-centric organizational school of thought. In this school the most important actors are organizations and corporations (companies) (Miller 2008: 217). This view of hegemony provides me with the tools to research U.S. hegemony, companies and structural power in more profound way. In other words, it enables me to look at how U.S. and Chinese power is distributed among these countries and their companies. Thus, I speak of a U.S. Hegemony if U.S. corporations have the most structural power. Furthermore, this school also pays much attention to role of power that these corporations have (Miller 2008: 12). Hereby this school of thought accord the most with the outline of this thesis.
The social scientist that is closely related to the concept of hegemony is Gramsci. This Italian Marxist used the term hegemony to describe a process were actors exert their cultural
10 dominance over others to impose a worldview over others. The goal was to create an acceptance of the political, economic and social ideas that were imposed by the hegemon (Gramsci 1971). Of course, the view of Gramsci is over simplified, but again it is notable that the theory of hegemon does not focus only on one level. Most of the levels are closely related to each other, this makes analysing just one or two of levels difficult but doable.
In the field of international relations, the theories of hegemony are also an important domain for social scientist. The theory I want to discuss in this section is the hegemonic stability theory. This theory states that the international systems remain stable when one actor is in charge (Goldstein 2005: 107). In the past there have been different hegemons such as the Portuguese, the Dutch and the British. The U.S. has claimed the position of the hegemon after the second world war.
In this field of international relations namely the hegemonic stability theory there are two schools that try to give a better understanding of hegemonic actors. One school is the systemic school of thought and the other is the represented through the theory of long cycles. First, I shall start with the school of systemic school of thought. Followed by the long cycle theory.
The first school of hegemonic stability theory namely the systemic school of thought focusses it mostly on the economic factor of a hegemon (McCormick 1990: 77). So, they do in less respect focus on the cultural, social and political level. This does not mean that they deny the existence of the importance of these levels, the focus is not on these elements. Because economic dominance is important they divide economic dominance in different sectors. The sector of economic dominance are trade, production and finance. Later, in this section I will come back on these division of economics.
The other school or focus of the hegemonic stability theory is the long cycle theory that is foremost presented by the scholar Modelski (1987). He argues that hegemonic stability comes in cycle around 75-100 years and the before the transition of the hegemon in power and the new rising hegemon there has always been a war between the two actors. Because the hegemon in power does not give their power up so easily, but in a point in time the hegemon in power could not compete and loses the battle. A new hegemon then rises to give the international community stability.
I want to end this section surrounding the topic of hegemonic stability theory with the classical neoliberal perspective. The neoliberal interpretation of this theory argues that a hegemon creates institutions to stay in power (Ikenberry 1999). Institutions probably do not extinct when a hegemon loses their power to a new upcoming hegemon. Institutions then are
11 separated from their hegemon and act on their own. In the U.S. for instance institutions like the IMF or the World bank are institutions that when the U.S. loses their hegemonic position there are probably not going extinct. The goals of these institutions are then to help defend the hegemon with giving protection to the hegemon in power. These institutions are thus created to minimize the loss of a hegemon when it is declining in power.
This neoliberal perspective covenant with Strange (1994) her conceptualization of power. The hegemon creates structures to stay in power, these structures are institution such as IMF and the World bank, but these structures also are the proxies given by Fichtner (2016). Companies with a high market capitalization enables these companies to influence and shape the structure for their own gain.
Edwards (1995) provides examples of how big companies can shape the structures to maintain their power. The ability to buy smaller companies is higher if a company have a high market capitalization (Edward 1995: 336). This is one example how companies with a high market capitalization can shape the structures to control their future income. Another example is that big companies adopting a policy whereby they threaten smaller companies with suits that they could not afford (Edward 1995: 339). Discrimination is also a tool that big companies uses to shape the structures. When demand is low, customers are scares distributors are likely to prefer the well-known product of the big companies (Edward 1995: 338). Not only do big companies have power to shape structures on basis of their production and sale, they also have advantage in politics, public relations and finance (Edward 1995:345). A company with a high market capitalization could lobby their preferences by ministers and in this respect influence policy to their own benefit. Following these arguments, two hypotheses originate from this.
H1: When capital is positively accumulated by a company, power (market capitalization) increases over time
H2: Companies with a large market capitalization maintain their power over time, because they can shape the structures that are needed to control future earnings
The concentration of power is universal. The underneath assumption is that all companies want to control their future earnings and therefore the concentration of power is similar for every nation. Hypothesis three is originated from this.
H3: For the U.S. as well for China power is concentrated into a conglomeration of a few companies
To conclude, I discussed GDP as proxy for economic power, capitalization and the hegemonic stability theory. Furthermore, I conceptualized power and gave examples how
12 companies can shape structure with their market capitalization. In the next chapter I will discuss the methods I used to answer my research question.
3 Methods
In this section I will discuss the method I used to answer my research question: ‘’How is power
distributed in global finance, focussing on the market capitalization of public listed companies of the U.S. and China since 2012? This section is structured as follows: first, I will describe
both cases (the U.S. and China). I’m going to discuss their economic structures in relation to global finance. Also, I legitimize the choice for these countries. Why I did choose the U.S. and China as cases for my thesis. Second, I use data from the Orbis database to answer my main question. I provide some information of Orbis and legitimize why I chose it. After legitimizing the choice for Orbis, I will provide the search string I used in the Orbis database that eventually gave the information, that, I needed to answer my research question. Finally, power is operationalized. All these facets will help to answer my research question in a more profound way.
3.1 Cases
The U.S. is the hegemon on different aspect of the social world. They dominate economics, the cultural and social sphere and politics. After the second world war, the U.S. provides Europe, for instance, with tools that grow their economy. They have big industries and business that have power not only in their domestic country, but, also in other countries across the globe. The U.S. case is very interesting because it shined light on a phenomenon that in the field of hegemonic stability theory is new. According to long-cycle theory a hegemon loses power on all different levels of society and a new rising power is competing for this power. It finally ends with a war between the old hegemon and the new power. The GDP of the U.S. is in decline since the 20th century, but their economic power is not. (Starss 2013; Fichtner 2016) and with the current growth rate of China’s GDP China is then seen as the new competitor for the hegemonic position.
I used the U.S. for my thesis because it is the most prominent player in the economic world. Furthermore, the U.S. is also recognized among other scholars as a key player in the economic world (Starss 2013; Fichtner 2016; Nye 2010; Gelb 2010). Not only does the U.S. have a dominant position on ownership in non-domestic countries (Starss 2013), the U.S. also dominates 9 other proxies as an Anglo-American actor. China does not come close in these proxies for economic power, they only come close with their current GDP rate, but even then,
13 China needs to wait presumably till 2028 to pass the U.S. Moreover, in this thesis the question if China can overtake the U.S. on basis of market capitalization will also be answered.
Furthermore, the reason that the U.S. dominates the other proxies for economic power is because according to hegemonic stability theory, that the hegemon creates structures to maintain power. In the world of global finance new institutions are being created that makes sure that the U.S. maintains their power. Another important element is that in global finance, the state that has an open economic infrastructure attracts business and along business there comes money. The U.S. in this matter, has a very open economic structure and thus attracts business.
The Chinese case is very different from the U.S. case because the state China has not a very open economic infrastructure (Fichtner 2016: 16). Furthermore, China is much more focused on industry as a developing country, they control company leader and have large-scaled infrastructure projects. Also, they do not allow foreign companies on their stock exchange. The mainland of Chinese markets is thus still restricted from foreign investors. Moreover, private actors play an important role in Chinese stock market because most of the companies are privately or state owned. Also, the state controls the capital flows of business. This is not attracting for foreign investor because if something goes wrong with a stock market, it is not possible to withdraw their money at any time.
To conclude, I chose the U.S. as case because first of their dominant role in the economic system and second because they are an architype of business. I chose China because of their availability to contest the hegemon position of the United Sates. But also, because their economic structure is very different from that of the United States. The U.S. has a very open economic infrastructure, while China has state owned economic infrastructures this makes the comparison between these two countries with each other very interesting.
3.2 Orbis database
The data I used for my thesis is originating from the Orbis data base. Orbis is a database that contains comprehensive information on companies worldwide. They provide information about stocks, obligations, ownership, market capitalization and cover many other subjects. They also divide companies into publicly listed or private. Orbis then is a very extensive database that provides data for my thesis. Of course, I understand that the data of the Orbis database is not perfect, but it is the best to use because of the amount and reliability of their data.
14 data. It is possible to minimalize it to just one companies with the correct search string. For the data of this thesis the following search strings were being used.
Search String 1: U.S. → Public listed companies → New York Stock Exchange Search String 2: U.S. → Public listed companies → NASDAQ
Search String 3: China → Public listed companies → Shanghai Stock Exchange Search String 4: China → Public listed companies → Shenzhen Stock Exchange The first path is the country of researching, in my thesis this is the U.S. and China. Then I focussed on the public listed companies of these countries. Private companies on the other side are not useable for this thesis, because the data of most private companies are incomplete. Moreover, I specialized it to the following stock exchanges, I look at: New York Stock Exchange, the NASDAQ, Shanghai Stock Exchange and Shenzhen Stock Exchange. These search string narrowed down my research the amount of data that is used to answer my main question. The results of these search strings are summoned in section 3.3.
But the data in the Orbis database is far from perfect. They lack data from few companies and this results in that there is a gap in market capitalization. According to numbers of the WFE the total market capitalization of Shanghai and Shenzhen stock exchange is $8.710.996 million, while according to Orbis this is less namely a market capitalization of $5.664.240 million. This also applies for the U.S. but to a lesser extent. According to WFE the U.S. has a market capitalization of $32.120.702 million, while Orbis provides a market capitalization of $27.228.851 million. As shown in section 3.3 companies without data are left out of the data that is analysed. I have addressed this with look at 2017 and every country that doesn’t have data in 2017 are excluded. In almost every case all the companies that did not have data of 2017 had also no data before 2017. This can explain the difference in numbers between WFE and Orbis. Companies are also ordered from their market capitalization of 2017, because if I excluded all the companies without data Johnson & Johnson would for instance be left out of the analysis. Every company with a given market capitalization is included in the analysis.
3.3 Stock Exchanges
For the scope of this thesis it is not possible to look at the distribution of power of all the stock exchanges around the world, so I focus only on the following stock exchanges. I focus on the New York stock exchange, NASDAQ, the Shanghai stock exchange and the Shenzhen stock exchange.
The difference in market capitalization makes it interesting to conduct research, because the U.S. and their stock exchanges have a 6 times higher market capitalization than China and
15 their stock exchanges. Is there a difference in the power distribution structures if there is a difference in market capitalization? Table 2.1 gives an overview of the amount of companies and the market capitalization of these stock exchanges.
Table 2.1 Overview of stock exchanges Stock Exchange/Factors Total companies stock exchanges Companies used for analysis Companies without data of 2017 Companies not legally based in domestic country Market capitalization (2017) in Dollars NYSE (US) 2232 1576 438 218 18.211.363 NASDAQ (US) 2505 1999 237 269 9.017.488 Shanghai (China) 1386 1050 336 0 3.313.280 Shenzhen (China) 2122 1873 249 0 2.350.960 Hong Kong 2136 x x x 3.180.657
Source: Orbis database
Furthermore, some big companies are not included such as Tencent and Alibaba. Tencent is legally based on the Cayman Island, but have a headquarter in Shenzhen. Moreover, Tencent is place on the Hong Kong stock exchange. The Hong Kong stock exchange is not included in the analysis of Chinese market capitalization, because Hong Kong is an autonomous region it will not count as Chinese market capitalization. The total market capitalization of the Hong Kong stock exchange is $3.180.657 million. Two companies have a big share, the first is Tencent with a market capitalization of $493.548 million and China Mobile Limited $207.663 million. Alibaba is also legally based on the Cayman island and in contrast to Tencent it operates on the New York stock exchange. Alibaba’s market capitalization of 2017 is unknown in the Orbis database, but in 2015 it was 197.219 million.
I do not include companies that are not legally based in the domestic country of researching because this does not help answering the question of how power is distributed between the hegemon and their competitor. I continue now with the operationalization of power.
3.4 Operationalization of power
In this last part of the method section power is being operationalized. The following quote will contribute to the discussion why it is important to operationalize power by means of DPC and
16 share of market capitalization. ‘’Some of the important consequences of bigness depend, not upon the power of certain large enterprises, but upon the relative place of large-scale business organization in the economy as a whole’’ (Edward 1995: 349). With the DPC operationalization the relative place of companies can be studied. This also count for the other operationalization of power by means of share in market capitalization.
I will use the operationalization of capital as a differential power claim over the social process by Nitzan (1998). The differential power of capital (DPC) that is owned should be measured relatively. Comparing the combined capital with the average capital unit a DPC percentage is given. In other words, DPC is measurement to compare a capital of a capitalist with the average. A DPC of 5 means then, that this capitalist if 5 times stronger than the average.
Amount of market capitalization (company) Differential Power of Capital (DPC) = ---
The average market capitalization of the concerned stock exchange
First, this operationalization of power helps us to research the distribution of power among capitalist. Second, it sees accumulation and power as separate categories, where power lies in the essence of accumulation. In other words, it is not that market capitalization equals power, but that market capitalization or in Nitzan words accumulation is a proxy to measure power. Moreover, the DPC is foremost focussed on the individual power of a company in comparison with the average. Therefore, I also going to look at aggregation of companies. I will look at the top 10, top 50, top 100, top 250 and top 500 and then look what their share as aggregation is in the total market capitalization of the stock exchange. Furthermore, I will also look at the share in market capitalization of the top 10. It contributes to the analysis of the distribution of power, because they are the most powerful companies. I divide the amount of market capitalization of the aggregation with the total amount. This percentage then tells how much power these companies have combined.
The total amount of market capitalization of concerned conglomeration Share in market capitalization = ---
Total market capitalization of the concerned stock exchange
To summarize this chapter, I discussed the different cases and legitimized of the use of these cases. Moreover, I provided information surrounding the Orbis database and the search strings I used. Also, I legitimized the stock exchanges I used for this thesis. I ended with the
17 operationalization of power. In the next chapter I will discuss the results of my research and answer the sub questions to finally answer my main question of this research.
4 Results
In this chapter the results of my research are showed. I will answer each of my sub question in separated sections. This chapter is structured as follows. In paragraph 4.1 I will discuss the U.S case and answer the question How is power distributed between U.S. public listed companies
focussing on the NYSE and NASDAQ? In the next paragraph 4.2, I execute the same research
as in paragraph 4.1, but then focussed on the Chinese case. The question that is answered in this paragraph is How is power distributed between Chinese public listed companies focussing on
the Shanghai stock exchange and Shenzhen stock exchange?
4.1 The U.S. distribution of power
Source: Orbis database
The U.S. has a big share of the total market capitalization in the world. The current (2017) U.S. share in the total market capitalization is 31.92 % and their numbers accumulated from 24,84% in 2011. Moreover, the share in market capitalization of China is low in comparison with the U.S.. China has a share in market capitalization of 6.6% in 2017. Figure 1.1. shows the U.S. and Chinese market capitalization in comparison with the world.
€ 0,00 € 10.000.000,00 € 20.000.000,00 € 30.000.000,00 € 40.000.000,00 € 50.000.000,00 € 60.000.000,00 € 70.000.000,00 € 80.000.000,00 € 90.000.000,00 2011 2012 2013 2014 2015 2016 2017
Figure 1.1 US and Chinese Market Capitalization compared
to the Worlds total amount of Market Capitalization in
Millions
NYSE NASDAQ Shanghai Shenzhen
18 In the following chapter I zoom in on the companies of the NSYE and NASDAQ and try to answer the question How is power distributed between U.S. public listed companies focussing
on the NYSE and NASDAQ? First, I am going to look at the share in market capitalization of
the top 10. I start with the New York Stock Exchange and then NASDAQ. Then I will look what the DPC score is of these companies, it is then possible to say how much stronger these companies are in comparison with the average company. Hereafter, I will do the same for these stock exchanges but then with a conglomerate of more companies. I will look at the top 50, top 100, top 250, top 500 and top 1000. After this it is possible to show how power is distributed among countries in both U.S. stock exchanges.
4.1.1 The distribution of power in the New York Stock Exchange
The 10 most powerfull companies of the New York Stock Exchange based on market capitalization are (1) Johnson & Johnson, (2) JPMorgan Chase & CO, (3) EXXON Mobil Corp, (4) Walmart Inc., (5) Bank of America Corporation, (6) Wells Farrgo & Company, (7) Berkshire Hathaway Inc., (8) AT&T Inc., (9) Chevron Corporation and (10) Home Depot Inc. Figure 1.2 shows the share in market capitalization of these companies in the New York Stock exchange 1,86 1,93 2 2,05 2,06 1,38 1,6 1,64 1,6 1,85 1,98 2,04 3,42 3,78 3,3 2,67 2,34 2,4 1,95 2,29 2,24 1,80 1,87 1,53 1,31 1,75 0,61 1,20 1,24 1,28 1,26 1,43 1,69 1,58 1,72 1,79 1,94 2,00 1,77 1,64 0,89 0,94 1,04 1,25 1,19 1,34 1,46 1,95 1,83 1,38 1,19 1,53 1,67 1,31 2,31 2,03 1,79 1,45 1,22 1,42 1,31 0,74 0,96 0,81 0,94 1,15 1,07 1,29 0 2 4 6 8 10 12 14 16 18 20 2011 2012 2013 2014 2015 2016 2017
Figure 1.2 Share in Market Capitalization top 10 in % (NYSE)
19 All the top 10 companies have an average between 1,29%-2,06%. The drop of EXXON Mobil Corp is one worth mentioning. In 2011 they had a market share around 3,42% this decreased in the following years, in 2017 they had a market share 1,95%. They meet the average in 7 years. The total share of the top 10 in market capitalization increased a bit from 16.17% (2011) till 16.48% (2017). This means that just 10 companies have 1/6 of the total market capitalization. The next section will show the DPC of these top 10 countries over time. The Differential Power of Capital is measured with the amount of capital divided over the average. Figure 1.3 shows the DPC of the top 10 countries since 2011.
This figure shows that the top 10 has a significant more power than the average. Johnson & Johnson and JPMorgan both have a DPC of 32. The lowest company, Home Depot, has a of 20. The DPC of the top 10 increased a bit in 7 years, in this respect the most powerful companies became a little bit more powerful. It increased from 255 to 260, albeit the total amount of DPC didn’t increased significantly power in the top became divided among these companies. Both figures (1.2 and 1.3) already indicate that power is concentrated in the top. In the following figure the companies in de New York Stock Exchange are put together in a conglomerate of the top10, top 50, top 100, top 250 and top 500 then the distribution of power is better visible.
29 30 31 32 32 22 25 26 25 28 31 32 70 60 52 42 37 38 31 36 35 28 29 24 21 28 10 19 20 20 20 23 27 25 27 28 31 32 28 26 14 15 16 20 19 21 23 31 29 22 19 24 26 21 36 32 28 23 19 22 21 12 15 13 15 18 17 20 0 50 100 150 200 250 300 350 2011 2012 2013 2014 2015 2016 2017
Figure 1.3 DPC of Top 10 NYSE
20 Figure 1.4 shows that power is very concentrated around the 500 companies of the New York Stock Exchange. The top 500 companies hold 92% of all the market capitalization of this exchange. When the amount of companies is decreased, the market share of the top companies does not decrease proportional. The top 250 companies hold a market share 79%. What is even more surprising is that the top 100 companies hold a market share of 60%. Furthermore, all the aggregated companies are steady over time. They increased or decreased with approximately 1%-2%. The top 50 is the only conglomerate that lost a share of market capitalization in comparison with the other aggregation, they lost 2% over 7 years. In the next section the study is repeated but then with the NASDAQ.
4.1.2 Power distribution in the NASDAQ
There are other companies enrolled in the NASDAQ, the most important companies are: (1) Apple, (2) Amazon, (3) Microsoft, (4) Facebook, (5) Alphabet, (6) Intel, (7) Comcast, (8) Pepsico, (9) Cisco System and (10) Nvidia. Power is more spread among companies in the top 10 of the NASDAQ. Figure 1.5 shows the share in market capitalization of the top 10 of the NASDAQ 16% 18% 17% 16% 16% 14% 16% 47% 48% 46% 45% 47% 43% 45% 61% 63% 61% 60% 62% 58% 60% 80% 81% 80% 79% 81% 77% 79% 90% 92% 91% 91% 92% 89% 92% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2016 2017
Figure 1.4 Share of Total Market Capitalization
of
Top 10 - Top 500 companies (NYSE)
21
Source: Orbis
For instance, Apple has a share in market capitalization, namely above 8%. Moreover, Apple had a market share of almost 18% in 2012. After this year their share in market capitalization decreased to 9,23% in 2013 and 8,83% in 2017. Power is more divided among companies in the Nasdaq. It fluctuates between the 1,64% and 8.83, in comparison with the NYSE (1,29%-2,06%).
In figure 1.6 the DPC of the top 10 companies on the NASDAQ are given. First, the top 10 holds more power than the average compared to the top 10 from the New York Stock Exchange. Apple DPC decreased with 88, in other words they lost a lot of power. In contrast to this trend Amazon, Alphabet and Facebook increased in power. Alphabet didn’t play a role till 2015. When they entered the stock exchange they achieve a significant amount of power. Alphabet had in their first year a DPC of 78, this number decreased in 2016 to 73 and increased in 2017 to 76. Also, the amount of DPC is higher on the NASDAQ. The top ten have combined
13,2 17,55 9,23 10,8 10,04 8,72 8,83 2,77 3,19 3,89 2,57 5,06 5,12 6,25 7,72 7,21 6,14 6,17 5,7 5,78 5,9 0,82 2,19 3,11 3,79 3,87 4,67 3,62 3,37 3,48 4,35 2,88 2,75 3,14 2,59 2,47 2,4 1,75 2,22 2,37 2,21 1,89 2,36 2,06 3,65 2,97 2,71 2,53 2,32 2,16 1,89 3,09 2,4 2,91 2,31 2,31 2,21 1,74 0,32 0,21 0,19 0,19 0,25 0,85 1,64 0 5 10 15 20 25 30 35 40 45 2011 2012 2013 2014 2015 2016 2017
Figure 1.5 Share in Market Capitalization Top
10 in % (NASDAQ)
Apple Amazon Microsoft Facebook Alphabet Intel Comcast Pepsico Cisco Nvidia corp
22 a DPC of 776, in comparison with a DPC of 260 of the NYSE. The top 10 of the NASDAQ is thus more powerful than the top 10 of the NYSE.
The top 10 companies of the NASDAQ hold 39% of the total market capitalization, in comparison with the 16% of the New York Stock Exchange. This trend also applies to the other conglomerations of top companies. The Top 50, top 100, top 250 and top 500 of the New York
Stock Exchange in comparison with the NASDAQ is respectively 45% (NYSE) -66% (NASDAQ), 60%-76%, 79%-87%, 92%-94%. Moreover, there is a small gap between the top 250 and top 500 companies, the top 250 companies add only 7%13% to the share in total market capitalization. Figure 1.7 shows these findings.
264 351 184 216 201 174 176 55 64 78 51 101 102 125 154 144 123 123 114 115 118 16 44 62 76 77 93 72 67 70 87 58 55 63 52 49 48 35 44 47 44 38 47 41 73 59 54 51 46 43 38 62 48 58 46 46 44 35 6 4 4 4 5 17 33 0 100 200 300 400 500 600 700 800 900 2011 2012 2013 2014 2015 2016 2017
Figure 1.6 DPC of Top 10 (NASDAQ)
23
Source: Orbis Database
4.2 The Chinese distribution of power
The U.S has a market capitalization of $27.288.851 million, while the Chinese have a market capitalization of $5.664.240 million in 2017. The growth rate each year of the total Chinese market capitalization is 32,71% while U.S total market capitalization is growing with 18%. Following this trajectory, as figure 2.1 shows, China will be able to have a higher market capitalization than the U.S. in 2031.
Source: Orbis Database
37% 39% 32% 33% 38% 37% 39% 61% 63% 60% 61% 66% 65% 66% 73% 75% 72% 73% 76% 76% 76% 85% 86% 84% 85% 87% 87% 87% 92% 93% 92% 92% 93% 93% 94% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2016 2017
Figure 1.7 Share in Market Capitalization of Top Companies
Top 10 - Top 500 (NASDAQ)
Top 10 Top 50 Top 100 Top 250 Top 500
$-$200.000.000 $400.000.000 $600.000.000 $800.000.000 2017 2019 2021 2023 2025 2027 2029 2031 2033
Figure 2.1 Market Capitalization Growth
24
4.2.1 The distribution of power in the Shanghai stock exchange
Six of the top 10 companies of the Shanghai Stock Exchange are banks. The top 10 consist of the following companies: (1) Industrial & Commercial Bank of China, (2) Agricultural Bank of China, (3) Kweichow Moutai, (4) Bank of China, (5) China Merchants Bank, (6) China Petroleum & Chemical corporation, (7) Shanghai Pudong Development Bank, (8) SAIC Motor, Corporation, (9) Industrial Bank Co, (10) CRRC Corporation. The shares that these companies have in the total market capitalization of the Shanghai Stock Exchange is given in figure 2.2.The distribution of power in the Shanghai stock exchange is comparable to the NASDAQ. In the NASDAQ the share in market capitalization of the top 10 fluctuates between the 1,64% and 8,83%, almost the same applies for the top 10 companies of the Shanghai Stock exchange, with a share fluctuating between 1,29%-7,75%. The industrial & Commercial Bank of China has the most market capitalization. Albeit, it decreased with 6,37% in 7 years, it still has a share of 7,75%. Furthermore, the following companies share the same amount of share in market capitalization: The CRRC, Industrial Bank and SAIC Motor and SPDB all have a share of 1,29%-1,64. These companies have sizable amount of power.
Source: Orbis Database
14,12 12,24 9,71 8,38 6,52 6,55 7,75 0,68 0,80 7,24 6,85 5,01 5,02 5,22 2,55 2,51 1,37 1,41 1,45 2,31 4,06 7,25 6,43 5,27 5,28 4,46 3,99 3,88 2,66 2,60 2,31 2,22 1,96 2,00 2,77 6,38 5,42 4,19 3,85 2,50 2,85 2,72 2,01 2,03 1,81 1,90 1,80 1,83 1,64 1,53 1,78 1,33 1,29 1,24 1,42 1,64 1,72 2,01 1,69 1,73 1,46 1,69 1,50 0,52 0,54 0,52 0,43 1,55 1,23 1,29 0,00 5,00 10,00 15,00 20,00 25,00 30,00 35,00 40,00 45,00 2011 2012 2013 2014 2015 2016 2017
Figure 2.2 Share in Market Capitalization Top 10
in % (Shanghai)
25 Just in comparison with the NASDAQ 4 companies hold the biggest share in the top 10. Furthermore, the percentage of share in market capitalization are alike.
In figure 2.3 the DPC of the top 10 companies on the Shanghai Stock Exchange is given. The growth of the Agricultural Bank of China is remarkable, it grew from a DPC of 7 to a DPC of 102 in 2013 to finally a DPC of 5 in 2017. The power of the Agricultural Bank of China grew significantly in this. Moreover, the Bank of China and CPCC declined in their DPCC from 76 to 41 (BOC) and from 67 to 29 (CPCC). At large, the power of the top 10 in the Shanghai stock exchange became less, starting with a DPC over 400 it decreased to a DPC under 350 in 7 years.
Source: Orbis database
This trend is then comparable with the New York Stock Exchange.
In Figure 2.4 the conglomeration of power in the top 10, top 50, top 100, top 250 and top 500 are shown. All these conglomerations experienced a dip from 2014 to 2015, but after 2015 it increased. 91% of the total market capitalization is owned by the top 500 companies. This is a similar trend with the NYSE (92%) and NASDAQ (94%). The top 10 of Shanghai (32%) has a higher percentage than the top 10 of the NYSE (16%), but less than the top 10 of the NASDAQ (39%). 148 129 102 88 68 69 81 7 8 76 72 53 53 55 27 26 14 15 15 24 43 76 67 55 55 47 42 41 28 27 24 23 21 21 29 67 57 44 40 26 30 29 21 21 19 20 19 19 17 16 19 14 14 13 15 17 18 21 18 18 15 18 16 5 6 5 5 16 13 14 0 50 100 150 200 250 300 350 400 450 2011 2012 2013 2014 2015 2016 2017
Figure 2.3 DPC of top 10 (Shanghai)
26
4.2.2 The distribution of power in the Shenzhen Stock Exchange
The top 10 companies of the Shenzhen stock market consist in contrast to the Shanghai not merely on banks. The top 10 companies of the Shenzhen stock market are: (1) MIDEA Group Company, (2) Yibin Wuliangye Co., (3) China Vanke Co., (4) Hangzhou Hikvision Digital Technology Company, (5) Gree Electrical Appliances, INC. of Zhuhai, (6) Jiangsu Yanghe-
39% 36% 35% 33% 28% 29% 32% 59% 58% 56% 57% 48% 50% 55% 66% 67% 65% 66% 56% 58% 65% 78% 79% 78% 79% 72% 73% 80% 89% 90% 89% 90% 86% 86% 91% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2016 2017
Figure 2.4 Share in Total Market Capitalization
Top 10 - Top 500 (Shanghai)
Top 10 Top 50 Top 100 Top 250 Top 500
0,71 0,83 0,49 1,24 2,28 4,17 3,14 1,23 1,10 0,70 0,93 1,98 2,41 2,87 1,61 1,81 1,59 1,42 1,97 1,40 0,95 0,73 0,80 1,85 0,90 1,05 1,70 1,77 1,34 0,73 0,91 0,57 0,62 0,93 1,58 0,77 0,76 0,68 0,42 0,39 0,82 1,12 1,36 1,47 0,88 0,51 0,56 0,69 1,09 0,64 0,86 0,77 0,71 0,64 0,59 0,54 0,60 0,64 0,00 2,00 4,00 6,00 8,00 10,00 12,00 14,00 16,00 2011 2012 2013 2014 2015 2016 2017
Figure 2.5 Share in Total Market Capitalization Top 10 in %
(Shenzhen)
27 Brewery Joint-Stock Co., (7) ZTE Corporation, (8) Yunnan Baiyao Group Co., (9) GF Securities Co. and (10) Shanghai Raas Blood Product Company.
The power distribution in the Shenzhen stock exchanges differs from the Shanghai and NASDAQ because these stock exchange have companies that have a significantly more power than their competitors. Moreover, the share in total market capitalization fluctuates between the 0,64%-2,28%. Furthermore, Yibin Wuliangye Co. has a declining share in total market capitalization since 2011. It dropped from 4,17% to 1,98 % in 2017. Furthermore, the top 10 increased their share in market capitalization in 7 years, in other words the became more powerful. This trend is different from all the other stock exchanges research so far. The New York stock exchange and NASDAQ stayed closely similar, while the Shanghai stock exchange decreased over time.
In figure 2.6 a same decline is visible of Yibin Wuliangye, they lost in power. Their DPC dropped from 86 in 2011 to a low point in 2015 with a DPC of 15, but it increased to 41 in 2017. The top 3 companies have a similar amount of power in comparison with the other countries in the top 10. Yibin Wuliangye has a DPC of 41, China Vanke of 40 and Hangzhou Hikvision Digital Technology Company of 38. Other companies such as GF Securities, ZTE decreased, Jiangsu Yanghe Brewery Joint-Stock Co. Yunnan Baiyao Group Co, decreased but are quite similar in 2017. Respectively a DPC of 13, 17, 19, 14 .
In figure 2.7 the share of the top 10, top 50, top 100, top 205, and top 500 are showed. When compared to other stock exchanges we see that the amount of power is not concentrated
13 15 9 23 43 78 59 23 21 13 17 37 45 54 30 34 30 27 37 26 18 14 15 35 17 20 32 33 25 14 17 11 12 17 30 14 14 13 8 7 15 21 25 28 17 10 11 13 20 12 16 14 13 12 4 4 9 11 10 11 12 0 50 100 150 200 250 300 2011 2012 2013 2014 2015 2016 2017
Figure 2.6 DPC of top 10 Shenzhen
28 in the same way as it is concentrated in the New York Stock Exchange, NASDAQ and Shanghai stock exchange. The concentration of power in the Shenzhen stock exchange is the lowest of
all. The top 10 has only 14% share of the total market capitalization. The top 50 has only a 27% share. The top 100 (37%), top 250 (53) and the top 500 (69%) that these number show a low concentration of power. Power is concentrated, but less concentrated than in other stock exchanges originated from the U.S. or China.
To conclude, Big companies possess a lot of capital as it has shown. With this capital they can influence policy, laws or buy competition in forms of ownership. They do this because they want to control and/or predict their future earnings. Market capitalization is a way to research power because money is power as it most liquid form.
5 Conclusion & Discussion
To summarize, the main question of this thesis was ’How is power distributed in global finance,
focussing on the market capitalization of public listed companies of the U.S. and China since 2011? I analysed this with looking at two U.S. stock exchanges and two Chinese stock
exchanges. I looked at the companies from the New York stock exchange, the NASDAQ, the Shanghai stock exchange and the Shenzhen stock exchange. Power is concentrated in a few companies in all four stock exchanges. But they do differ in structure.
The New York stock exchange is characterized with the small increase of power in 7 years. Furthermore, in these 7 years power is more divided between the companies of the top 10. The companies situated on the NASDAQ, also increased in their share of market
11% 11% 9% 9% 7% 8% 14% 23% 22% 22% 19% 16% 19% 27% 33% 34% 30% 28% 24% 27% 37% 49% 49% 46% 44% 39% 42% 53% 63% 64% 63% 61% 57% 59% 69% 0% 10% 20% 30% 40% 50% 60% 70% 80% 2011 2012 2013 2014 2015 2016 2017
Figure 2.7 Share in Total Market Capitalization
Top 10 - Top 500 (Shenzhen)
29 capitalization, but the difference between companies is big. Apple has market share of 8.8% and a Differential Power of Capital (DPC) of 176. This means that they are 176 time stronger than the average. Amazon (DPC 125), Microsoft (DPC 118), Facebook (DPC 93) and Alphabet (DPC 70) are the companies situated on the NASDAQ.
The Shanghai stock exchanges differs from the NASDAQ and New York stock exchange in their distribution of power. In the period 2011-2017 the top 10 lost in power, their share in market capitalization decreased from 39% to 32%. Similar to the distribution of power of the NASDAQ the top 4 companies are more powerful than the rest of the top 10. These companies are the Industrial & Commercial Bank of China, Agricultural Bank of China, Kweichow Moutai and Bank of China,
Shenzhen differs from all other stock exchanges researched in this thesis. It is the only stock exchange were power in the top 10 increased. Their share in market capitalization increased from 11% to 14%. Furthermore, power between the top 10 is divided in a similar way with the New York Stock Exchange. Companies differ from a share in market capitalization from 0.64% to 2.18%. 4 companies are key players in this stock exchanges MIDEA Group Company, Yibin Wuliangye Co., China Vanke Co., Hangzhou Hikvision Digital Technology Company.
Furthermore, I found that 90% of the power is concentrated in 500 companies of three stock exchanges (NYSE, NASDAQ and Shanghai stock exchange).
I want to conclude this research with the notion if China can challenge the hegemonic position of the U.S. This research shows that China can overtake the U.S. market capitalization in 2031 with their current growth rate. Hereby, China does challenge the U.S their growth is higher than that of the U.S.
Further research could focus on the power distribution of other stock exchanges all over the world. It is interesting to look at stock exchanges that originated from Europe. Furthermore, my research could be extended to a longer time frame. The time frame I used consist only of 6 years. Moreover, I understand the data from Orbis is not perfect but nevertheless useful to conduct research with. Market capitalization as proxy for economic power is a new way to look and measure economic power, therefore more research should be conducted in this field to broaden the discussion of how to measure economic power.
30
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