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Common Ownership of Competing Firms: Evidence from Australia

Author

Listed:
  • Leigh, Andrew

    (Parliament of Australia)

  • Triggs, Adam

    (Australian National University)

Abstract

We provide the first estimates of the extent of common ownership of competing firms in Australia. Combining data on market shares and substantial shareholdings, we calculate the impact of common ownership on effective market concentration. Among firms where we can identify at least one owner, 31 percent share a substantial owner with a rival company. Analysing 443 industries, we identify 49 that exhibit common ownership, including commercial banking, explosives manufacturing, fuel retailing, insurance and iron ore mining. Across the Australian economy, common ownership increases effective market concentration by 21 percent. Our estimates imply that if listed firms seek to maximise the value of their investors' portfolios, then they place the same value on $3.70 of their competitors' profits as on $1 of their own profits. We discuss the limitations of the available data, and the potential implications of common ownership for competition in Australia.

Suggested Citation

  • Leigh, Andrew & Triggs, Adam, 2021. "Common Ownership of Competing Firms: Evidence from Australia," IZA Discussion Papers 14287, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14287
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    References listed on IDEAS

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    Cited by:

    1. Andrew Leigh, 2022. "A More Dynamic Economy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(4), pages 431-440, December.
    2. Jonathan Hambur, 2023. "Product Market Competition and its Implications for the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 99(324), pages 32-57, March.
    3. Lømo, Teis Lunde, 2024. "Overlapping ownership and input prices," International Journal of Industrial Organization, Elsevier, vol. 94(C).

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    More about this item

    Keywords

    antitrust; Modified Herfindahl-Hirschman Index; Herfindahl-Hirschman Index; market concentration; horizontal shareholding; competition;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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