Investigating the Inequality of Communication Structure in the Iranian Stock Market through Social Network Analysis Approach

• Main Authors: Reza Taghizadeh, Ali Ruhani
• Format: Article
• Language: fas
• Published: university of isfahan 2020-09-01
• Series: پژوهش‌های راهبردی مسائل اجتماعی ایران
• Subjects: structural inequality; iran stock market; analysis of social network; economic development; pareto distribution
• Online Access: https://ssoss.ui.ac.ir/article_25020_0a788681ff7f6be9d8ab91fe88f1bc3e.pdf

Introduction Stock markets are considered as complex types of multi-agent networks due to the interaction of different companies and investors. Studies dealing with financial data modeling have shown that network models of financial data refer to many features related to the stock market. The stock market is one of the main predisposing factors of wealth equality as far as everyone could almost invest in it; however, unfortunately, a vast majority of the stock market wealth is in hands of rich people leading to inequalities and concerns. According to Carlson (2018), companies mostly focus on shareholders rather than workers, and the main part of corporate profits is distributed among shareholders after paying the employees’ salary and benefits, taxes, etc. As a result, it can be concluded that the shareholders of a company earn more profit than the workers in a company. The present study, as an interdisciplinary study, sought to investigate inequality in the communication structure of the Iran stock market. Concerning the significance of inequality in power distribution in the stock market, this interdisciplinary research could reveal and highlight the hidden layers of communication power distribution in the Iran stock market. In this way, it is possible to inform the policymakers of the existing and real trend, hidden behind the scenes, and provide a desirable space for making changes.     Materials and Methods This research was a quantitative network analysis study based on data collection and analysis. The main approach of this study was the use of graphic techniques based on Graph Theory (a branch of topology) that allowed investigating the relationship between actors (nodes) in a network, visually, algebraically, and logically, with the help of matrix algebra. This study was carried out at five levels of industries, companies, shareholders, board members or managing directors, and the auditing firms in the Iran stock market. The statistical population of this study included all industries, companies, shareholders, board members, managing directors, and auditing firms that were present at the stock market from 2011 to 2017, whose data were available, and no sampling needed to be done. The required data were collected mainly through data banks of the Tehran Stock Exchange Organization and Rahavard Software. Moreover, data analysis was done using the network analysis method and Excel (version 2016), PreMap (Version 1), and UCINET (Version 6).   Discussion of Results and Conclusions The research findings showed that the stock market had skewness at the level of industries, companies, shareholders, auditing firms, board members, and managing directors and the communication power was not evenly distributed among them. Although there was a difference between how the units were related to each other, most of them were interrelated. However, some units were in a better position than others in establishing such a relationship. Some gaps were found among the position of units which made a huge difference and created a stratified structure (there were also some units in relation to the board members that acted as a bridge for other units making them connected to the main part of the communication network, and created some kind of bus morphology). A better position has made these units confront less intermediary to access other units that have quick access and gain higher capability in getting information through clusters of network members. Moreover, there were units  in the communication path of other units with the result of gaining power to influence others. As far as these units were located in the path of information flow, they had access to information more easily and faster than others. This made it possible for them to make right decisions at certain moments and grow, or conversely misuse the position and create information rent for themselves and cause inequality and even bubble. Concerning the research findings, it could be argued that there was a governing inequality in all studied aspects of the Iran stock market which could lead to information and economic rent. Although the results of other studies in different countries have confirmed this finding, the situation seems to be more complicated in the Iran stock market. It is worth noting that such a complicated and unequal position in Iran could lead to an increasing gap between different classes and the growing inequality of ownership between upper and lower classes in society. Moreover, it could have many social consequences such as the growing feeling of relative deprivation, social distrust, lack of social participation, etc. However, concerning the findings and uncovering the hidden side of unequal reality in the distribution of communication power in the Iran stock market, social planners could take steps to make this market more equitable through changing political and governance strategies so that the disadvantaged minority could also benefit from material resources.