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Anticompetitive Effects of Common Ownership




Many natural competitors are jointly held by a small set of large institutional investors. In the U.S. airline industry, taking common ownership into account implies increases in market concentration that are 10 times larger than what is “presumed likely to enhance market power” by antitrust authorities. Within‐route changes in common ownership concentration robustly correlate with route‐level changes in ticket prices, even when we only use variation in ownership due to the combination of two large asset managers. We conclude that a hidden social cost—reduced product market competition—accompanies the private benefits of diversification and good governance.

Suggested Citation

  • José Azar & Martin C. Schmalz & Isabel Tecu, 2018. "Anticompetitive Effects of Common Ownership," Journal of Finance, American Finance Association, vol. 73(4), pages 1513-1565, August.
  • Handle: RePEc:bla:jfinan:v:73:y:2018:i:4:p:1513-1565
    DOI: 10.1111/jofi.12698

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    Blog mentions

    As found by, 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 are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2019. "Can partial horizontal ownership lessen competition more than a monopoly?," Economics Letters, Elsevier, vol. 176(C), pages 90-95.
    2. Crane, Alan D. & Koch, Andrew & Michenaud, Sébastien, 2019. "Institutional investor cliques and governance," Journal of Financial Economics, Elsevier, vol. 133(1), pages 175-197.
    3. Matthew Backus & Christopher Conlon & Michael Sinkinson, 2019. "Common Ownership in America: 1980-2017," NBER Working Papers 25454, National Bureau of Economic Research, Inc.
    4. González-Uribe, Juanita, 2020. "Exchanges of innovation resources inside venture capital portfolios," Journal of Financial Economics, Elsevier, vol. 135(1), pages 144-168.
    5. Park, Jihwon & Sani, Jalal & Shroff, Nemit & White, Hal, 2019. "Disclosure incentives when competing firms have common ownership," Journal of Accounting and Economics, Elsevier, vol. 67(2), pages 387-415.
    6. Koptyug, Nikita & Persson, Lars & Tåg, Joacim, 2020. "Should we worry about the decline of the public corporation? A brief survey of the economics and external effects of the stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    7. Gao, Kaijuan & Shen, Hanxiao & Gao, Xi & Chan, Kam C., 2019. "The power of sharing: Evidence from institutional investor cross-ownership and corporate innovation," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 284-296.
    8. Chad Syverson, 2019. "Macroeconomics and Market Power: Context, Implications, and Open Questions," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 23-43, Summer.
    9. Li, Zhan, 2017. "Shareholder Activism Externalities," MPRA Paper 91635, University Library of Munich, Germany, revised 21 Jan 2019.
    10. Papadopoulos, Konstantinos G. & Petrakis, Emmanuel & Skartados, Panagiotis, 2019. "Product innovation transfer under passive partial ownership holdings," Economics Letters, Elsevier, vol. 177(C), pages 22-25.
    11. Shy, Oz & Stenbacka, Rune, 2019. "An OLG model of common ownership: Effects on consumption and investments," Journal of Macroeconomics, Elsevier, vol. 62(C).
    12. Roychowdhury, Sugata & Shroff, Nemit & Verdi, Rodrigo S., 2019. "The effects of financial reporting and disclosure on corporate investment: A review," Journal of Accounting and Economics, Elsevier, vol. 68(2).
    13. Sato, Susumu & Matsumura, Toshihiro, 2019. "Free Entry under Common Ownership," MPRA Paper 97525, University Library of Munich, Germany.
    14. Ciliberto, Federico & Watkins, Eddie & Williams, Jonathan W., 2019. "Collusive pricing patterns in the US airline industry," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 136-157.
    15. McAdam, Peter & Petroulakis, Filippos & Vansteenkiste, Isabel & Cavalleri, Maria Chiara & Eliet, Alice & Soares, Ana, 2019. "Concentration, market power and dynamism in the euro area," Working Paper Series 2253, European Central Bank.

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