Rethinking Common Ownership
Year: 2020
Type: preprint
Abstract: A recent stream of literature debates the anti-competitive effects of common ownership based on product price data. I show that product prices alone are not informative about anti-competitive incentives created by common ownership when non-price attributes are also affected. Accounting for heterogeneity in firms’ technologies and incentive structure, I relate pricing and output policies to dollar market shares and profit margins for a sample of 11,000 US companies in the period of 1980 to 2013. I find that a one-standard-deviation increase in firms’ common ownership is associated with a reduction of their industry adjusted net profit margin of 1.8% to 3.9% and that a one-standard-deviation increase in rivals’ common ownership correlates with a decline in market share growth of up to 1.1% for non-common held firms. This evidence suggests that the asymmetry of real world common ownership leads to the formation of coalitions inside an industry and that commonly-held firms compete more aggressively, particularly towards their non-linked peers.
Source: SSRN Electronic Journal
Author: Sebastian Rötzer
Institutions: Swiss Finance Institute, University of Lausanne
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3173585492