Anticompetitive Effects of Common Ownership

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

José Azar

University of Navarra, IESE Business School

Martin C. Schmalz

University of Michigan, Stephen M. Ross School of Business; CEPR; 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 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

Martin C. Schmalz

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan St
R5456
Ann Arbor, MI 48109-1234
United States
7347630304 (Phone)

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

CEPR ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Isabel Tecu

Charles River Associates (CRA) ( email )

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

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