Are US Industries Becoming More Concentrated?

69 Pages Posted: 31 May 2015 Last revised: 26 Feb 2017

Gustavo Grullon

Rice University - Jesse H. Jones Graduate School of Business

Yelena Larkin

Schulich School of Business, York University

Roni Michaely

Johnson@Cornell Tech, Cornell University

Date Written: Feb 23, 2017

Abstract

This paper presents findings indicating a structural shift in US product markets that has weakened competition. 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, which suggests that market power is becoming an important source of value. In real terms, the average publicly-traded firm is three times larger today than it was twenty years ago. We propose that lax enforcement of antitrust regulations and increasing technological barriers to entry appear to be important factors behind this trend, resulting in 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

Grullon, Gustavo and Larkin, Yelena and Michaely, Roni, Are US Industries Becoming More Concentrated? (Feb 23, 2017). Available at SSRN: https://ssrn.com/abstract=2612047 or http://dx.doi.org/10.2139/ssrn.2612047

Gustavo Grullon (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

P.O. Box 2932
Houston, TX 77252-2932
United States
(713) 348-6138 (Phone)
(713) 348-6331 (Fax)

HOME PAGE: http://www.ruf.rice.edu/~grullon/

Yelena Larkin

Schulich School of Business, York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Roni Michaely

Johnson@Cornell Tech, Cornell University ( email )

111 8th Avenue #302
New York, NY 10011
United States

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