Is common stock ownership really such a big deal?

We investigate the relation between common institutional ownership of the firms in an industry and product market competition. We find that common ownership is neither robustly positively related with industry profitability or output prices nor robustly negatively related with measures of non-price competition, as would be expected if common ownership reduces competition. This conclusion holds regardless of industry classification choice, common ownership measure, profitability measure, non-price competition proxy, or model specification. Our point estimates are close to zero with tight bounds, rejecting even modestly-sized economic effects. We conclude that antitrust restrictions seeking to limit intra-industry common ownership are not currently warranted.

That is from a new paper by Andrew Koch, Marios A. Panayides, and Shawn Thomas, forthcoming in the Journal of Financial Economics.  A useful corrective to some of the exaggerations I have seen floating around.


Comments for this post are closed