64 Pages Posted: 31 May 2015 Last revised: 1 May 2017
Date Written: April 23, 2017
More than 75% of US industries have experienced an increase in concentration levels over the last two decades. Firms in industries with the largest increases in product market concentration have enjoyed higher profit margins, positive abnormal stock returns, and more profitable M&A deals, suggesting that market power is becoming an important source of value. Lax enforcement of antitrust regulations and increasing technological barriers to entry appear to be important factors behind this trend. These findings are robust to the inclusion of private firms and factors that account for foreign competition, as well as the use of alternative measures of concentration. Overall, our findings suggest that the nature of US product markets has undergone a structural shift that has weakened competition.
Keywords: industry concentration; HHI; product markets; profit margins; publicly-traded firms; M&A; antitrust
JEL Classification: G18, G30, G34, G48, L40, L10
Suggested Citation: Suggested Citation
Grullon, Gustavo and Larkin, Yelena and Michaely, Roni, Are US Industries Becoming More Concentrated? (April 23, 2017). Available at SSRN: https://ssrn.com/abstract=2612047 or http://dx.doi.org/10.2139/ssrn.2612047