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Common Ownership in America: 1980–2017

Author

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  • Matthew Backus
  • Christopher Conlon
  • Michael Sinkinson

Abstract

We empirically assess the implications of the common ownership hypothesis from a historical perspective using the set of S&P 500 firms from 1980 to 2017. We show that the dramatic rise in common ownership in the time series is driven primarily by the rise of indexing and diversification and, in the cross section, by investor concentration, which the theory presumes to drive a wedge between cash flow rights and control. We also show that the theory predicts incentives for expropriation of undiversified shareholders via tunneling, even in the Berle and Means (1932) world of the widely held firm.

Suggested Citation

  • Matthew Backus & Christopher Conlon & Michael Sinkinson, 2021. "Common Ownership in America: 1980–2017," American Economic Journal: Microeconomics, American Economic Association, vol. 13(3), pages 273-308, August.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:3:p:273-308
    DOI: 10.1257/mic.20190389
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Common Ownership: Back to Basics
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2019-02-11 14:47:56

    Citations

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    Cited by:

    1. Oz Shy, 2021. "College Education, Earning Inequality, and Market Power," Journal of Labor Research, Springer, vol. 42(3), pages 334-357, December.
    2. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2020. "Overlapping ownership, endogenous quality, and welfare," Economics Letters, Elsevier, vol. 190(C).
    3. Wang, Qingjuan & Bai, Keke & Li, Yang, 2025. "Institutional cross-ownership and M&A premiums: Micro evidence from China," International Review of Economics & Finance, Elsevier, vol. 103(C).
    4. Gibbon, Alexandra J. & Schain, Jan Philip, 2023. "Rising markups, common ownership, and technological capacities," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    5. Dasgupta, Amil & Fos, Vyacheslav & Sautner, Zacharias, 2021. "Institutional investors and corporate governance," LSE Research Online Documents on Economics 112114, London School of Economics and Political Science, LSE Library.
    6. Hutschenreiter, Dennis & Liu, Qianshuo, 2025. "From rivals to allies? CEO connections in an era of common ownership," IWH Discussion Papers 7/2025, Halle Institute for Economic Research (IWH).
    7. Koenraadt, Jeroen & Martens, Tim & Sextroh, Christoph, 2024. "Social media analysts, managerial learning, and corporate innovation," LSE Research Online Documents on Economics 124417, London School of Economics and Political Science, LSE Library.
    8. Emmanuel Petrakis & Panagiotis Skartados, 2022. "Vertical Opportunism, Bargaining, and Share-Based Agreements," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(4), pages 549-565, June.
    9. Wenjun Su & Xiaohui Zhao, 2025. "The impact of common institutional ownership on green innovation of China’s energy firms," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-21, December.
    10. Albina Gibadullina, 2024. "Who owns and controls global capital? Uneven geographies of asset manager capitalism," Environment and Planning A, , vol. 56(2), pages 558-585, March.
    11. Porter, Robert H., 2020. "Mergers and coordinated effects," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    12. Hamid Beladi & Chi‐Chur Chao & Kuo‐Hsuan Chin, 2024. "Cross‐ownership, business dynamism, and wage inequality in general equilibrium," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(4), pages 570-587, September.
    13. Andreas Bovin, 2025. "Cartel Member or Free Rider? Detecting Collusion at the Firm Level," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 66(3), pages 293-324, March.
    14. Xu, Lili & Zhang, Yidan & Matsumura, Toshihiro, 2022. "Cournot–Bertrand comparison under common ownership in a mixed oligopoly," MPRA Paper 114644, University Library of Munich, Germany.
    15. Gilje, Erik P. & Gormley, Todd A. & Levit, Doron, 2020. "Who's paying attention? Measuring common ownership and its impact on managerial incentives," Journal of Financial Economics, Elsevier, vol. 137(1), pages 152-178.
    16. Matthew Backus & Christopher Conlon & Michael Sinkinson, 2021. "Common Ownership and Competition in the Ready-to-Eat Cereal Industry," NBER Working Papers 28350, National Bureau of Economic Research, Inc.
    17. Mou, Shaobo & Yi, Sijia & Zhang, Qiufeng & Liu, Danping, 2025. "Common institutional ownership and executive pay-performance sensitivity: Mediating role of information transparency and fund occupation," Research in International Business and Finance, Elsevier, vol. 74(C).
    18. Yi Liu & Toshihiro Matsumura, 2024. "Welfare effects of common ownership in an international duopoly," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(2), pages 459-477, May.
    19. Gao, Lei & Han, Jianlei & Kim, Jeong-Bon & Pan, Zheyao, 2024. "Overlapping institutional ownership along the supply chain and earnings management of supplier firms," Journal of Corporate Finance, Elsevier, vol. 84(C).
    20. Khoo, Joye & Zheng, Chen & Pathan, Shams, 2024. "The beneficial effect of common ownership: Evidence from bank liquidity creation," Journal of Banking & Finance, Elsevier, vol. 163(C).
    21. José Azar & Xavier Vives, 2021. "General Equilibrium Oligopoly and Ownership Structure," Econometrica, Econometric Society, vol. 89(3), pages 999-1048, May.
    22. Oz Shy & Rune Stenbacka, 2020. "Common ownership, institutional investors, and welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 706-723, July.
    23. Liu, Yi & Matsumura, Toshihiro, 2025. "Fuel diversification among firms and common ownership," MPRA Paper 125747, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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