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Working Paper
Estimating the Competitive Effects of Common Ownership
If managers maximize the payoffs of their shareholders rather than firm profits, then it may be anticompetitive for a shareholder to own competing firms. This is because a manager?s objective function may place weight on profits of competitors who are held by the same shareholder. Recent research found evidence that common ownership by diversified institutional investors is anticompetitive by showing that prices in the airline and banking industries are related to generalized versions of the Herfindahl-Hirschman Index (HHI) that account for common ownership. In this paper we propose an ...
Working Paper
The Effect of Common Ownership on Profits : Evidence From the U.S. Banking Industry
Theory predicts that "common ownership" (ownership of rivals by a common shareholder) can be anticompetitive because it reduces the weight firms place on their own profits and shifts weight toward rival firms held by common shareholders. In this paper we use accounting data from the banking industry to examine empirically whether shifts in the profit weights are associated with shifts in profits. We present the distribution of a wide range of estimates that vary the specification, sample restrictions, and assumptions used to calculate the profit weights. The distribution of estimates is ...