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The Product Market Impact of Minority Stake Acquisitions

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  • Amrita Nain

    (Tippie College of Business, University of Iowa, Iowa City, Iowa 52242)

  • Yan Wang

    (Rotterdam School of Management, Erasmus University, 3062 PA Rotterdam, Netherlands)

Abstract

We show that partial equity ownership of a rival firm reduces product market competition. Acquisitions of a minority equity stake in rival firms are followed by higher output prices and higher industry profits, particularly when barriers to entry are high. Stock-price reactions of nonparticipating competitors of the acquirer and target are positive while announcement returns of customer firms are negative. Moreover, announcement returns of rivals are significantly higher and those of customers weakly lower when the customer industry is more competitive and when the acquirer and target are larger firms.

Suggested Citation

  • Amrita Nain & Yan Wang, 2018. "The Product Market Impact of Minority Stake Acquisitions," Management Science, INFORMS, vol. 64(2), pages 825-844, February.
    • Handle: RePEc:inm:ormnsc:v:64:y:2018:i:2:p:-825-844
    DOI: 10.287/mnsc.2016.2575
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    Cited by:

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    9. Hariskos, W. & Königstein, M. & Papadopoulos, K.G., 2022. "Anti-competitive effects of partial cross-ownership: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 399-409.
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    13. Vives, Xavier, 2020. "Common ownership, market power, and innovation," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    14. Papadopoulos, Konstantinos G., 2022. "Advantageous symmetric cross-ownership and mergers," Economics Letters, Elsevier, vol. 220(C).
    15. Sertsios, Giorgo, 2020. "Corporate finance, industrial organization, and organizational economics," Journal of Corporate Finance, Elsevier, vol. 64(C).
    16. 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.
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    18. Jianxia Yang & Chenhang Zeng, 2021. "Collusive stability of cross-holding with cost asymmetry," Theory and Decision, Springer, vol. 91(4), pages 549-566, November.
    19. Li, Ran & Yan, Jin-Jiang & Wang, Xian-Yu, 2024. "Horizontal cooperation strategies for competing manufacturers in a capital constrained supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 181(C).
    20. Li, Youping & Zhang, Jianhu, 2021. "Product positioning with overlapping ownership," Economics Letters, Elsevier, vol. 208(C).
    21. Hunold, Matthias & Schlütter, Frank, 2019. "Vertical financial interest and corporate influence," DICE Discussion Papers 309, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
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    23. Roxana Manuela Dicu & Ioan-Bogdan Robu & George-Marian Aevoae & Daniela-Neonila Mardiros, 2020. "Rethinking the Role of M&As in Promoting Sustainable Development: Empirical Evidence Regarding the Relation Between the Audit Opinion and the Sustainable Performance of the Romanian Target Companies," Sustainability, MDPI, vol. 12(20), pages 1-17, October.
    24. Lømo, Teis Lunde, 2024. "Overlapping ownership and input prices," International Journal of Industrial Organization, Elsevier, vol. 94(C).

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