Common ownership and competition in product markets

Cross-shareholdings and competition in a rent-seeking contest

“…Azar et al (2019) and Brito et al (2018) find empirical evidence of anticompetitive effects of cross-shareholdings in the US banking sector and wet shaving industry, respectively. On the contrary, Koch et al (2020) do not find robust evidence of anticompetitive effects of common ownership in other US industries.…”

Testing the Theory of Common Stock Ownership

“…Using mergers between investment funds is a popular method of isolating exogenous variation in common ownership. However, the mergers Koch et al (2019) exploit do not affect the measures of common ownership used in the paper, making them a poor instrument. This stands in contrast to He and Huang (2017) who similarly use a dataset from 1980 to 2014 but employ a set of mergers that cause measures of cross ownership to increase.…”

“…They find that industries with higher levels of MHHI have lower levels of investment for any given Tobin's Q. Koch et al (2019) examines the correlation between common ownership and accounting profits, markups, capital expenditure, advertising, and other outcome measures. Overall, they find no relationship between outcomes and common ownership changes or levels, rejecting "even modestly sized economic effects."…”

The Endurance of Shareholder Value Maximization as the Preferred Corporate Objective

“…As a result, the empirical findings may be spurious. Others find that common ownership produces outcomes that are positive for competition and good corporate strategy: increased diffusion of innovations (Kostovetsky and Manconi, 2020), profitability and prices that are more consistent with firms that are competitive rather than cooperative (Kini et al, 2019; Koch, Panayides, and Thomas, 2020), and in the case of VC‐funded start‐ups with common owners, greater capital‐raising, lower likelihood of failures, and more successful exits via IPOs or acquisitions (Eldar et al, 2020).…”