Inequality Structure of Global Investment: Analysis and Simulation of an MA Network

Abstract

Companies considering investments should first examine the global economic structure. Despite the world becoming flatter every day, inequalities between countries still exist. However, any discussion about the emergence and continuation of such inequality remains controversial. In this study, we use a massive dataset of global mergers and acquisitions (M&A) to analyze the unequal capital relationship between countries. We find unilateral investment between pairs of countries that do not change over decades. To identify countries where investments or returns on investment accumulate, we simulate such accumulation by the movement of money between countries through M&A relationships. We formalize the iterative movement of investment/return capital using the PageRank algorithm. The simulation result illustrates a significant difference between countries: return on investments mostly accumulate in countries with high GDP per capita. Other countries have relatively few benefits compared to accumulating investment. Consequently, we conclude that the M&A network structure causes accumulation of returns in specific countries and results in continuous unilateral investment from rich countries to other countries.