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Product Market Competition in a World of Cross-Ownership: Evidence from Institutional Blockholdings

Forthcoming in the Review of Financial Studies

54 Pages Posted: 18 Jan 2014 Last revised: 14 Jan 2017

Jie He

University of Georgia - Department of Finance

Jiekun Huang

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: January 13, 2016

Abstract

We analyze the effects of institutional cross-ownership of same-industry firms on product market performance and behavior. Our results show that cross-held firms experience significantly higher market share growth than non-cross-held firms. We establish causality by relying on a difference-in-differences approach based on the quasi-natural experiment of financial institution mergers. We also find evidence suggesting that institutional cross-ownership facilitates explicit forms of product market collaboration (such as within-industry joint ventures, strategic alliances, or within-industry acquisitions) and improves innovation productivity and operating profitability. Overall, our evidence indicates that cross-ownership by institutional blockholders offers strategic benefits by fostering product market coordination.

Keywords: cross ownership, institutional blockholding, product market competition, institution merger, common ownership

JEL Classification: G23, G32, G34, L11, L22

Suggested Citation

He, Jie and Huang, Jiekun, Product Market Competition in a World of Cross-Ownership: Evidence from Institutional Blockholdings (January 13, 2016). Forthcoming in the Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=2380426 or http://dx.doi.org/10.2139/ssrn.2380426

Jie He (Contact Author)

University of Georgia - Department of Finance ( email )

B318 Amos Hall
Terry College of Business, University of Georgia
Athens, GA 30602-6253
United States

Jiekun Huang

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

HOME PAGE: http://www.huangjk.info

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