What if your owners also own other firms in your industry? The relationship between institutional common ownership, marketing, and firm performance

Abstract

The growth in institutional holdings of public firms has led to increased interest in the concept of common ownership, in which the same investor owns stakes in multiple firms within the same industry. Economic theory suggests that common ownership could affect firm performance, but little empirical research has examined the nature of this effect or how a firm's extant marketing potentially relates to this effect. This paper addresses this gap by proposing a relationship between common ownership and firm performance that is moderated by the firm's extant marketing capabilities and its relative marketing strategic emphasis. Our empirical approach employs data from over 43 million institutional holdings to develop a measure of common ownership and accounts for empirical issues like endogeneity and unobserved heterogeneity. The results document a positive relationship between common ownership and firm performance and provide some evidence that this effect is stronger for firms with lower marketing capabilities and a relative strategic emphasis towards R&D spending. These results suggest that public policymakers should consider the firms' extant strategic marketing when assessing regulations on common ownership.

Can common institutional ownership inhibit corporate over-financialization? Evidence from China

“…, 2019). Therefore, common institutional investors have an incentive to coordinate the resources of the firms in their portfolios (Healey and Mintz, 2022), thus enabling firms to have more abundant reserves of financial flexibility. Besides, the efficiency of an enterprise’s financial investment requires not only “hard resources” such as capital, but also “soft resources” such as financial knowledge and risk identification skills (Li and Liu, 2023).…”

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“…According to the resource dependence theory, as a node in the institutional investors' shareholding network, a common institutional investor can help a firm establish ties with other firms in the same industry (Gao et al, 2019). Therefore, common institutional investors have an incentive to coordinate the resources of the firms in their portfolios (Healey and Mintz, 2022), thus enabling firms to have more abundant reserves of financial flexibility. Besides, the efficiency of an enterprise's financial investment requires not only "hard resources" such as capital, but also "soft resources" such as financial knowledge and risk identification skills (Li and Liu, 2023).…”

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