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Common ownership and competition in product markets

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  • Koch, Andrew
  • Panayides, Marios
  • Thomas, Shawn

Abstract

We investigate the relation between common institutional ownership of the firms in an industry and product market competition. We find that common ownership is neither robustly positively related with industry profitability or output prices nor is it robustly negatively related with measures of nonprice competition, as would be expected if common ownership reduces competition. This conclusion holds regardless of industry classification choice, common ownership measure, profitability measure, nonprice competition proxy, or model specification. Our point estimates are close to zero with tight bounds, rejecting even modestly sized economic effects. We conclude that antitrust restrictions seeking to limit intra-industry common ownership are not currently warranted.

Suggested Citation

  • Koch, Andrew & Panayides, Marios & Thomas, Shawn, 2021. "Common ownership and competition in product markets," Journal of Financial Economics, Elsevier, vol. 139(1), pages 109-137.
    • Handle: RePEc:eee:jfinec:v:139:y:2021:i:1:p:109-137
    DOI: 10.1016/j.jfineco.2020.07.007
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    More about this item

    Keywords

    Common ownership; Governance; Competition; Horizontal merger;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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