Horizontal shareholding interlocks

Abstract

Horizontal shareholding interlocks induce Cournot industries to restrict production. The cartelizing effects of horizontal shareholding interlocks are greater if firms are mindful of indirect shareholding links than if only attentive to direct links. Indirect shareholding exists when a firm A holds stock in B and B holds stock in C. Several algebraic examples of Cournot industries with shareholding interlocks are explored.

Dynamic oligopoly with partial cooperation and antitrust threshold

“…If indirect shareholding (Flath 1991(Flath , 1992) is assumed, then the payoff of firm k has the form…”

“…Cartelizing effects of the financial interlocks have been proved in the literature (see, for instance Reynolds and Snapp, 1986, Flath, 1992and Merlone, 2001 On the other hand this issue is not ignored by antitrust regulation as Clayton Act 7 forbids the acquisition of the "whole or any part" of the stocks or assets of a corporation where the effect may be substantially to lessen competition.…”

“…While Berglof and Perotti (1994) and Arikawa and Kato (2004) consider cross shareholding effect in terms of corporate governance, Flath (1991Flath ( , 1992 and Merlone (2001) proved some results in terms of cartelizing effects. Different profit formulations are considered when studying the collusive effects of cross-shareholding, see for instance Reynolds and Snapp (1986) and Flath (1992). Merlone (2007) introduces a different profit formulation and gives a common form to the different profit formulations which is similar to the partial cooperation described in Bischi et al (2008).…”

Some notes on applying the Herfindahl–Hirschman Index

“…Anticompetitive behavior can be much more diverse than horizontal mergers, see for instance Whinston (2006). Furthermore, Flath (1992) proved the anticompetitive effects of horizontal shareholding whereas it is shown in Matsumoto et al (2009a) that shareholding interlocks are mathematically equivalent to partial cooperation. Therefore shareholding interlocks can also be interpreted as partial cooperation among the firms, so the HHI can be assumed to be a practical indicator of conspiracy.…”

Ownership relations in the presence of cross-shareholding

“…His model is particularly relevant for control questions and the proportional representation scheme in voting systems. In a series of papers, Flath (1992aFlath ( ,b, 1993 measures indirect shareholding for six major keiretsu groups in Japan. He shows that indirect shareholding in these groups is large, and should not be neglected because there are gains from indirect shareholding (which might explain the existence of keiretsu groups).…”