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
Date Written: January 13, 2016
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: Suggested Citation