Anticompetitive Effects of Common Ownership

79 Pages Posted: 22 Apr 2014 Last revised: 13 May 2018

See all articles by José Azar

José Azar

University of Navarra, IESE Business School; CEPR; ECGI

Martin C. Schmalz

CEPR; University of Oxford - Finance; CESifo; European Corporate Governance Institute (ECGI)

Isabel Tecu

Charles River Associates (CRA)

Date Written: May 10, 2018

Abstract

Many natural competitors are jointly held by a small set of large institutional investors. In the US 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 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.

Keywords: Competition, Ownership, Diversification, Pricing, Antitrust, Governance, Product Market

JEL Classification: L41, L10, G34

Suggested Citation

Azar, José and Schmalz, Martin C. and Schmalz, Martin C. and Tecu, Isabel, Anticompetitive Effects of Common Ownership (May 10, 2018). Journal of Finance, 73(4), 2018, Available at SSRN: https://ssrn.com/abstract=2427345 or http://dx.doi.org/10.2139/ssrn.2427345

José Azar (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

CEPR ( email )

London
United Kingdom

HOME PAGE: http://https://sites.google.com/site/joseazar/

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Martin C. Schmalz

CEPR ( email )

London
United Kingdom

University of Oxford - Finance ( email )

United States

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Isabel Tecu

Charles River Associates (CRA) ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

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